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Propane shortage prompts US Senate hearing

05.05.2014  | 

Many US homes and businesses were deprived of heat as last winter caused severe propane shortage and sent prices to a record, prompting policy makers to consider how to prevent future scarcity.




Propane shortages last winter that left many U.S. homes and businesses without heat and sent prices to a record are prompting policy makers to consider how to prevent future scarcity.

U.S. inventories of propane and propylene tumbled for 19 consecutive weeks from October to February and slid to 25.7 million barrels in March, the lowest level since 2010, according to Energy Department data. In the Midwest, where more homes use propane for heat than anywhere else in the nation, stockpiles plunged to an 11-year low.

Widespread supply declines came as bitter cold boosted demand and as U.S. exports of propane increased, raising costs for those needing to keep spaces warm during the winter months. The benchmark price in Kansas jumped 25% in the past year to $1.06 a gallon yesterday and surged to a record $4.95 on Jan. 23. That was nearly five times the average of 98 cents for the time of year.

“As policy makers, we need more than just Econ 101 as we consider options for preventing such a crisis from recurring,” U.S. Senator Lisa Murkowski said on May 1 at a Senate Energy and Natural Resources Committee hearing in Washington. “We need to have a deeper understanding of the factors that were at play.”

New pipelines have allowed producers to ship natural gas liquids, including propane and butane, from the central U.S. to the Gulf Coast. From there, materials can be sent overseas.

The U.S. exported 110.2 million barrels of propane and propylene in 2013, nearly double the volume of a year earlier, according to the Energy Information Admistration.Shipments abroad totaled 9.57 million barrels in February. The Midwest sent 1.8 million to the Gulf during the same time.

NGLs, which are pumped from wells along with natural gas and separated at fractionation plants, are used as feedstock in petrochemical plants, as diluent for heavy crude in pipelines and in gasoline blending.

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UOP Global Access

Interesting that there is no mention in this article of the large use of propane for corn driers. I read back in autumn that propane consumption by farmers was at record highs because of record crop production coupled with a wet and late harvest providing a lot of wet corn that needed to be dried before storage. This put midwest propane stocks low to start the winter heating season, and with the tough winter, never recovered. Interesting interaction between this hardship and biofuels and ethanol policies.

Regarding unconventional gas and oil, public opinion is going to be hard to address when they don't see any price benefit in their own pocketbook from the booms in Eagle Ford and Bakkan.

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