As U.S. freezes, prices soar for natural gas
A woman walks down the street in the Back Bay a day after a winter storm January 4, 2014 in Boston.
In parts of the Midwest, propane is double the usual price. Sam Sparks, who owns Miller Brothers Propane in Dewey Oklahoma, says his customers are getting hit by a double whammy: They need more -- to combat super-low temperatures -- as prices are spiking.
“When they’re looking at four-dollar-a-gallon propane, that kind of takes their breath away,” he says.
He says he’s actually selling to them for less than his current wholesale price. And he’s advising them to just buy enough to get them over the hump, till prices come down again.
He hopes. “I hope I’m not giving my customers bad advice,” he says.
Delivering smaller loads means extra work for his drivers, who cover a 50-mile radius. “Normally, we don’t like to run out and deliver just a hundred gallons,” he says. Three or four hundred is more the norm.
But making the extra runs to customers helps them out -- and it beats the alternative for him: Having to go out and refill his own supply when wholesale prices are so high.
“The trick for us is to try not to get our tanks full of this high-priced propane,” he says.
The Propane Education and Research Council, an industry group, says there’s plenty of supply -- it’s just in the wrong places right now.
But there aren’t pipelines to run that surplus to the shortage areas, and the alternatives are pricey. “It costs a great deal of money to run propane in an over-the-road truck from one region of the country to another,” says the group’s president, Roy Willis.
A similar problem lies behind the super-high natural gas in the Northeast. Spot prices there -- the same-day price on the wholesale market -- have gone 18 times higher than in the Midwest, even though lots of gas is coming from the Marcellus Shale region in nearby Pennsylvania.
“It’s not far away, but it’s not connected,” says Angelina LaRose, from the U.S. Energy Information Agency.
She means that there aren’t enough pipelines connecting the Marcellus to the East Coast.
Also, there’s no storage, says Jack Weixel, director of energy analysis at Bentek Energy. “There are no natural gas storage caverns east of the Hudson River,” he says. “Everyone on that side is effectively limited by what pipelines can carry to that market area.”