As a cold front brought another spell of below average temperatures to the lake area on Tuesday, the cost of propane and other heating fuels were expected to rise as shortages hit the Midwest.
Prolonged cold weather across much of the Midwest this winter combined with the acute extreme cold snap termed a "polar vortex" in addition to a large corn harvest with high moisture levels during the fall and infrastructure issues are being attributed with the rising prices.
The U.S. Energy Information Administration (EIA) was reporting temporary shortages of propane in the upper Midwest — Minnesota, Iowa, Wisconsin and Nebraska — at the end of October due to an abundant corn crop.
Corn and soybeans that do not naturally dry in the field to a moisture level of around 15-16 percent are instead dried with a specialized propane furnace. Most of the corn being harvested this fall was at a moisture level of 18-26 percent due to late planting last spring and extended cool, damp weather in October, according to an article from Corn & Soy Bean Digest. Harvest had to go forward to get the crop in before winter.
The shortage in the upper Midwest was excerbated as the demand for propane for home heating needs started to be seen in late October and early November.
For the week ending Nov. 1, Midwest propane inventories dropped more than 2 million barrels, the largest single-week stock draw in November since 1993, according to the EIA.
With the polar vortex that hit in early January setting new record low temperatures throughout the Midwest and most of the country, the shortage spread as more fuel was needed to keep households warm.
The Missouri Propane Gas Association (MGPA) estimated an increased demand in heating this winter of 80 percent above average in this state alone.
The association also blamed "infrastructure realignments" for inhibiting transport of propane in the Midwest.
The Cochin pipeline, which provided 40 percent of the product used by Minnesota suppliers and which helps supply six other states, was shut down for repairs, according to the MPGA. It is also in the process of being closed for propane liftings as operator Kinder Morgan Energy Partners LP makes modifications to reverse the flow of the pipeline in mid-2014 towards terminals in Canada.
Prices are rising as demand increases in the Midwest and suppliers pay more to keep propane in the region rather than going south to the Gulf Coast, according to the EIA in a Jan. 15 press release. Infrastructure changes have sent increasing amounts of propane and other hydrocarbon gas liquids (HGLs) to the Mont Belvieu, Texas on the Gulf Coast to supply petrochemical demand as well as the global market for HGLs, the press release states.
Page 2 of 3 - According to the MPGA, the new pipeline that moves propane from the Midwest to the Gulf Coast is shipping cargoes at nearly seven times the previous pace.
With global prices for propane significantly higher than U.S. prices, propane supplies will continue to be moved to the Gulf Coast for export, according to the EIA, and Midwest propane prices will continue to rise to keep marginal supplies in the region.
Missouri is mainly supplied by the Mid-American Pipeline out of a hub at Conway, Kan. Conway is also a supplier of the hub at Mont Belvieu, Texas.
The EIA showed climbing residential propane prices with the U.S. average cost per gallon close to $2.40 at the beginning of November rising to approximately $2.87 as of Jan. 13.
Last week's price was up about three cents per gallon over the prior week and up about 59 cents per gallon from the same time period in 2013.
As of Jan. 10, the EIA listed propane stocks at 38.654 million barrels down from the week before by 3.779 million barrels due to increasing demand.
While the rate of propane production was 1.42 million barrels per day, demand was hitting 1.736 million barrels per day as of Jan. 10. Compared to the week prior, production was down and demand was up.
As of Jan. 10, weekly U.S. propane stocks began running below the five-year range around the first of the year compared to being above the range last winter.
The MPGA as well as the National Propane Gas Association (NPGA) are working to expedite shipments of propane by all modes from pipeline to rail and commercial motor vehicle transport.
In recent weeks, they requested relief from federal regulations on Hours of Service restrictions for carriers participating in emergency relief efforts in order to expedite transport.
In Missouri, the state's Department of Public Safety subsequently issued an emergency declaration to waive those regulations Jan. 13-19. The waiver has now been extended through Jan. 26.
That means truck drivers will be allowed to drive extended hours to help bring propane to the Midwest.
Missouri is one of 30 states to have issued the waiver at some point this winter, according to the NPGA.
In a more unusual move, the U.S. Department of Transportation issued a regional emergency declaration for the Midwest on Jan. 19, waiving restrictions in Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Nebraska, Ohio and Wisconsin as well as Missouri.
The declaration, effective through the duration of the emergency or Feb. 11, provides for regulatory relief for commercial motor vehicles while providing direct assistance supporting the delivery of propane and home heating fuels into the affected areas.
A similar declaration is in effect 14 states in the eastern U.S.
Page 3 of 3 - Propane has not the been the only fuel to be affected.
Record natural gas withdrawals were made from storage facilities for the week ending Jan. 10., according to the EIA. The extreme cold also impacted natural gas production that week with "freeze-offs" occurring in parts of shales in Pennsylvania and Arkansas.
In a 2009 EIA survey, 49 percent of Missouri homes used natural gas as the main heating fuel and over 30 percent used electricity. Around 15 percent - mainly in rural areas of the state - used propane as the main heating fuel for their home.