Dave Randall, general manager at Apollo Propane in Moraine, says tells his customers the truth: There’s a huge market for U.S. propane exports worldwide, and that’s helping to push prices up domestically.
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“We’re a small company,” Randall said. “If we make pricing mistakes, we could go out of business.”
Fueled by high demand and the surge in shale oil drilling, propane prices has shot up over the last three years, from $2.17 a gallon to $2.82 a gallon in the Midwest, according to EIA data.
Kelly Van Hull, energy analytics director for Houston-based RBN Energy LLC, said strong propane exports coincided with last winter’s cold weather.
“The combination of high exports and more normal winter weather the past two winters has pulled propane stocks (supplies) down significantly from the 100 million barrels in storage we saw during the fall of 2015 and 2016,” Van Hull said in an email.
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With propane supplies falling over the past couple of years, the price of propane relative to crude oil has increased, she added.
Brian Buschur, a manager at Dayton’s McMahan’s Bottle Gas, however, said his prices have been steady. He said he doubts reports of national prices doubling.
“They have not doubled in the last three years,” Buschur said. “So no, we’re not seeing that.”
Prices fluctuate, and retail businesses have strategies to lock on to the best prices, he added. “Are they up? I mean, prices go up and down. It depends on which day you’re asking.”
But Randall said there’s no mistaking the “definite” rise in prices from where he stands.
Randall said gas purchased in the summer typically offers the lowest prices of the year. Many seek to secure contracts for winter gas in the summer, when they can be a good 20 cents- to 25 cents-a-gallon less than market rates in January, he said.
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Also, spot market rates are running about 30 cents higher than they were in July last year, Randall said.
“All we know is what we’re being told by our wholesalers and what we read in the industry publications,” Randall said. “If you follow energy, you know that crude is up pretty substantially over a year ago. That’s why gasoline is higher.”
Meanwhile, the world loves American propane, and heavy exports can drain domestic supplies.
“There is a huge market for propane worldwide, and particularly in Asia and Japan,” Randall said. “They are very thirsty for propane and huge amounts are being exported every month overseas.”
But the hope is that the pricing trend will start moving in a more forgiving direction.
Propane is not a naturally found fuel. Raw crude oil is refined to make different kinds of petroleum products, including propane. Weather, market demand, proximity to production and other factors all play a role in setting price.
Industry observers believe stronger crude prices will mean greater production of both crude and propane, which will boost supply.
“We all look for prices to come down soon,” Randall said.
The United States is now the world’s second biggest oil producer, second only to Russia. U.S. production has hit a record-setting pace this year, reaching 10.9 million barrels a day last month after oil prices rose above $70 a barrel for the first time in four years.
Midwest propane gas by the numbers
March 2016: $2.117
March 2017: $2.79
March 2018: $2.82
Source: U.S. Energy Information Administration
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