Propane shortage has area dealers scrambling

2014-02-09T16:00:00Z 2014-06-18T13:13:17Z Propane shortage has area dealers scramblingBy Keith Benman keith.benman@nwi.com, (219) 933-3326 nwitimes.com

The propane shortage is putting a big spotlight on a usually low-profile industry, with dealers making an epic effort to keep customers supplied.

Indiana and Illinois propane dealers are hunting high and low for loads of the precious fuel, sending trucks as far as Kansas and Texas to keep customers homes heated and farms operating.

Travis Barker, owner of Momence Bottled Gas in Momence, was filling out paperwork last week to receieve loads from the Texas terminal, which is best known for supplying propane overseas.

"That is the first time we have ever done that," Barker said.

Shawn Coady, president at Hicksgas, with locations in Lowell and other Northwest Indiana communities, said he has trucks going to Texas, Kansas, Missouri, and Mississippi for the product.

Coady and others point out customers' loyalty with their dealerships, located mainly in rural communities, often stretches back generations, so more than just profits are at stake.

"Basically, you go where there's gas," Coady said. "We've been delivering for 75 years, and I'll do my best to make sure we continue to keep people supplied."

U.S. propane stocks in the last week of January were 44.9 percent lower than one year ago, according to the U.S. Energy Information Agency.

Average residential propane prices in the Midwest pushed upward to $4.20 per gallon in the last week of January, as compared to an average price of just $2.40 two weeks before, according to the U.S. Energy Information Agency. Last year at this time prices averaged $1.77 per gallon.

The genesis of the crisis has four main causes, according to Scot Imus, of the Indiana Propane Gas Association.

The persistent cold weather, with its many sub-zero days, is the main factor. But supplies were already restricted by others.

Those include a sharp rise in exports in the past five years and a sharp rise in demand from farmers last year for drying corn because of wet fall weather and high yields. To make matters worse, an important pipeline from Canada went down for maintenance from late November through December.

"We could have survived one or two of those," Imus said. "But all of those coming together at the same time really crippled us and brought us to where we are today."

Most local propane dealers say a majority of their customers are on fixed-price contracts. For those customers, that narrows the issue to getting supplied.

"It would be suicide not to honor those contracts," Barker said.

Dealers also hedge against price increases by pre-purchasing propane or other means before demand rises in the fall so the cost of basic input remains stable. But because so many of their customers also are buying at a fixed price, the dealers are often having to eat shipping costs.

The change from going just 60 miles to pick up a load of propane at a terminal to sometimes going more than 1,000 miles can add 60 cents to 90 cents to the cost of a gallon of propane, according to dealers.

Those costs include not only fuel and wages for drivers, but sometimes paying drivers to wait up to 20 hours in line at terminals.

The situation with the shortages has improved during the last week and dealers report they have generally been able to keep customers supplied.

The biggest factor remains the weather. No one is predicting when the tight supply situation will end or what prices may do.

"It just depends if it stays cold," said Jason Main, a dealer with the Heritage FS cooperative, in Illinois. "It will be busy from now until it warms up."

In the meantime, dealers say they will keep braving sub-zero temperatures and record snowfalls to get to customers.

"It's ugly, but it's doable," Coady said.

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