No Propane Conserve What You Have

US is a net exporter of Propane

One morning last week the propane delivery truck backed down my driveway. My propane delivery had arrived as scheduled, I breathed a sigh of relief. However, due to the propane shortage here and in much of the Midwest; my propane supplier, Southern States, is low on propane. They only delivered 125 gallons filling my tank to the two thirds level. Southern States determined that every contract customer would get their tank filled to the two thirds level, for many that is about what they use in a month, for others that could carry them until spring. A uniformly imposed rule is how Southern States is dealing with their propane supply shortage. Southern States is reportedly only receiving the quantity of propane they bought earlier in the season under contract as pipeline companies try to stretch their dwindling inventories and now with the very cold winter, demand is up.

I belong to a homeowner buying group that has a contract with Southern States and a group price. So I got some propane (I understand that people without contracts did not get any propane) and we paid slightly under $3 a gallon. Overall, not too bad, but my tank is only two-thirds full and I have no idea when there will be more propane available. I’m fairly certain that by mid-April I will be able to buy all the propane I want, but I do not know if I will get a delivery next month. I have to make the propane in my tank last as long as possible. So, I lowered the thermostat to 64 degrees, lowered the hot water heater, discontinued use of my gas fireplace and I'm thinking about how to use less gas in cooking. Don’t feel too sorry for me, I have plenty of electricity. Though I had been trying to live within the electricity produced by my solar panels, I am tied to the grid and can use as much electricity as my budget will allow. I have dug out of the basement a couple of ceramic heat cubs and electric heating pads for the cat in addition I have an electric Brevelle countertop oven and an electric induction burner. We will survive in our fleece jackets and wooly socks.

The propane shortage is not due to a lack of propane. The growth in natural gas liquids production from shale gas and tight sands resources is rapidly increasing propane production. Three years ago, the U.S. propane market relied on imports to meet domestic demand. Today, domestic production exceeds demand, with exports rising quickly as production increases. Pipelines that once transported propane from the Texas coast to Oklahoma were reversed a year or two ago to carry oil and gas to the Texas coast. In 2012, propane produced in the U.S. from domestic natural gas and crude oil exceeded total U.S. consumer propane demand, and we became net exporters of propane. In 2012 net exports of propane were almost 1.0 billion gallons. What is causing the current shortage is a big surge in demand in the fall and winter and a lack of investment in excess storage and pipeline capacity in recent years. The pipeline companies were never able to transport propane at peak winter demand levels. They depended on in system storage to cover the shortfall. Increased demand in the fall by farmers to dry crops and artic cold snaps drained all the storage by early winter and the pipelines cannot catch up with the increased winter demand.

Residential demand represents almost 60 % of total consumer propane sales and average residential propane use per customer has been declining due to improvements in energy efficiency and conservation. Most of the demand for propane is in the winter, though propane’s share of the residential space heating market has been falling since 2007. Much of the loss is due technology improvements in electric heat pumps. New generation heat pumps are much more efficient than older units. In addition to improved operating characteristics at low temperatures, the heat output from new heat pumps has increased, improving the comfort they deliver. Equipment reliability and lifespan also have been improved, so more heat pumps have sold than propane heaters. In addition, geothermal heat pumps are spreading to markets that were too cold for conventional heat pumps to be effective.

These factors have combined to reduce the domestic market for propane. After peaking in 2003, nationwide consumer propane demand fell by more than 10 % through 2006. Although propane demand rebounded in 2007 and 2008 due to colder weather, propane consumption continued to decline in 2009, 2010, 2011, and 2012. Total consumer propane sales declined by more than 17 % between 2009 and 2012. Propane demand fell by 3% in 2011 and 11% percent in 2012. According to the U.S. Department of Energy the declines in 2011 and 2012 were due primarily to much warmer than normal weather and conservation. So pipelines were diverted and storage was not increased. We as a nation were ill prepared to respond to the surge in demand that happened this winter. Overall, there is plenty of propane, just not where you need it and when you want it. So, it’s 64 degrees in my office and 61 degrees in my home gym.

forecast for propane demand from May 2013