It’s no secret that as winter months approach, it is likely that consumers will see a rise in their propane price. It’s easy to understand why – there is an increase in use all over the country because it’s colder. Consumers are using their heaters more often, turning on their propane fireplaces, and cooking large meals for family and friends.
This year, however, it is forecasted that propane prices will be higher than many of us have seen in a while. In preparation for this, here are a few reasons why this winter, in particular, is slated to see growing costs for your energy use.
The Exports and Inventory Story
In the early 2010’s, production of propane in the U.S. started to increase. Demand for our fuel domestically remained the same. So, what were propane producers to do? Export internationally. During the ramp up of production though, international demand was slow and our U.S. docks didn’t have the capacity to house all the propane being produced. This resulted in low prices for U.S. consumers for quite a while. But, toward the end of the 2010’s demand in places like Asia increased significantly which also encouraged companies to increase U.S. dock capacity. Currently, exports outpace domestic use. With the Covid-19 pandemic hitting hard, production has slowed; exports, however, haven’t stopped.
This year, we are seeing U.S. propane inventories near the bottom of a six-year average. It’s likely national inventories of propane will drop below this average by November of this year. As cold weather hits, domestic demand will need to contest with exports – especially if importing countries also experience cold weather at the same time. Additionally, March 2020 marked the end of a 25% tariff on propane imported into China, making our fuel much more affordable for Chinese companies. This added to the increase in exports internationally.
Here’s a look at propane inventory on September 9, 2021. Data provided by the U.S. Energy Information Administration:
Low Inventory + International Demand Willing to Pay High Prices = HIGH Prices are Likely Here in the U.S.
Prices WILL Increase In Other Energy Sectors Too
The gas and diesel industries are also seeing increases in prices. The average price for a gallon of gas in the U.S. is a little over a dollar ($1.00) higher than it was this time last year, as of 9/27/21. Diesel is no different, these prices are also averaging over a dollar more per gallon than last year.
Even the electric utilities will be raising prices. The most recent numbers (from 2018) show that in California nearly 44% of our electricity is still produced by natural gas-powered plants. We import 32% of our electricity consumption from other states. The electric grid operator in California sought an emergency order from the Biden Administration in early September to allow our state to operate natural gas power plants to produce electricity without restrictions for 60 days. This is because we are facing a shortfall of electricity equivalent to powering 2.6 million homes during peak hours. If most of our electricity is being produced by natural gas, and prices for petroleum products are up everywhere in the U.S., then the price to produce electricity will also go up. All this means a similar story to the propane industry’s current struggles – low supply, and a higher cost to produce a product, will equal higher prices for the end user.
This chart below shows what sources are currently used to produce California’s electricity.
How Can DLE Help You This Winter?
We’ve been watching the above scenario play out closely. This means we’ve been preparing for low inventory and pre-purchasing fuel. DLE has strong fuel contracts with our suppliers to ensure we have propane ready for you this winter. We will do our best to keep our pricing fair for our customers. As it goes with all industries though, as our prices from our suppliers go up we will need to pass some of that cost along to our customers.
Don’t Forget What YOU Can Do!
Sign up for a payment plan – we will do our best to accommodate most circumstances and help put you on a plan that works well for you. Contact your local office to learn more.
If you are a will-call customer, be sure to monitor your use. Contact us when your tank gauge is at 30% to ensure we have time to deliver before you run out of propane. Also, please keep in mind there is no need to “panic purchase”. We will make sure we have propane when you need it! Please be mindful of our minimum delivery requirements. Subject to credit approval, you may also choose to be a regularly routed customer and we will take on the responsibility of monitoring your tank.
Contact your local office to learn more about your options this winter.
BPN August 2021 Issue