Check you propane tanks and call your supplier when you’re down to 20 or 30 percent—that’s the advice from New Horizons General Manager David Neal.
Neal took the time earlier this week to explain the current propane shortage and rising price. Understanding how we got to this point begins with understanding the commodity itself. Propane, or liquid petroleum, or LP as it also called, is refined from crude oil or natural gas, according to Neal. Since propane is made throughout the year, but primarily used in the heating season, fuel made in the off-season must be stored.
Storage takes place in caverns, Neal explained. One of the major pipelines to serve the upper Midwest delivers propane that is stored in caverns near Conway, Kansas. That pipeline delivers propane to, among other places, a terminal in Dubuque, Iowa, where New Horizon takes delivery of the propane it purchases.
New Horizon contracts with the Cenex Co-op to deliver the propane in tanker semi-trucks to its local tanks, like the one they own in Gays Mills.
Normally, supplies of propane are not an issue and the only effect demand has on the commodity is on the price. This year, things are a little different and the very supply is in question, while prices have risen up to five times their level last fall from $1.45 to over $7 per gallon earlier this week in northern Wisconsin.
What caused the shortage and price increase? Neal explained several factors combined to create a unique ‘perfect storm’ scenario.
Today’s super-high prices actually began last summer with some very low prices. Producers facing low prices decided last year to sell quantities of propane abroad for higher prices, according to Neal. The exported propane meant that the amount put into storage in places like the caverns in Conway, Kansas was less than the capacity. The caverns weren’t filled.
The next factor is the late high-moisture corn crop that required a large amount of propane in the corn driers.
Local corn grower Daryl Aspenson said he was forced to deal with some corn with moisture as high as 25 or 26 percent. The corn must be dried to about 14 percent to be acceptable for storage and sale. That takes a lot of propane.
Overall, Aspenson said the amount of propane used for drying corn was the most used since 2009. The heavy agricultural use further drew down the amount being stored in the caverns in Conway, Kansas.
Then, the heating season began in earnest before Thanksgiving. With some record cold temperatures in December and January, heating needs were greater than they have been in many years.
Then, there’s the last straw or the final piece of the perfect storm. Another pipeline that brings propane into the upper Midwest from Canada was shutdown for three weeks in December for maintenance.
So, what is happening to local propane customers? Well, a couple of things actually.
New Horizons is presently able to fulfill propane orders to all of their customers.
It means local route drivers, as well as the contracted Cenex semi-tanker drivers, are working lots of long hours. It also means that Neal has been on the phone every day since November sourcing propane.
While some suppliers in northern Wisconsin have been forced to ration propane and limit customers to 150 gallons, New Horizons is doing okay and filling tanks without limits, the general manager noted.
New Horizons is also able to honor contracts of customers who prepaid for propane last fall with some as low as $1.45 per gallon. Those contracts allowed New Horizon to lock in those prices as well.
Unfortunately, for customers who pay for propane as it’s delivered, there has been a large increase. The local co-op has tried to keep the price as low as possible given the circumstances, but is facing a high price to obtain the non-contracted propane, according to Neal.
“We are not allocating or ‘short filling’ as it is sometimes called,” Neal said. “The tanks are being filled as they normally would be filled.”
While Neal acknowledged the state and federal government’s relaxation on maximum hours the truck drivers can drive has helped keep the propane coming, there is little else the government can do to help right now.
Neil said he continues to look for different sources to supplement the propane obtained from Cenex, New Horizons primary source.
He noted some companies are sending semi-tankers to the Texas refineries, but the trip takes five to six days to complete including a day or two wait in line at the refinery. That’s not going to help New Horizons much since they need six tanker loads per day at this point.
“That’s the challenge right now,” Neal said. “We just don't have access to another 30 trucks to run back and forth to Texas.” He noted freight companies in Texas might step forward to help out with the hauling.
One thing helping New Horizons obtain propane from the terminal in Dubuque is that allocations are made to suppliers based on their off-season orders. New Horizons does a lot of off-season buying through its summer fill program.
The cash price for New Horizons on Monday, Jan. 27 was $4.21, Neal indicated.
The current situation of demand exceeding supply and driving the price is known in the propane world as a “short squeeze,” according to Neal.
While the general manager feels good about New Horizons’ ability to deliver propane to customers during the shortage, he admitted to feeling bad for those customers who didn’t contract for propane and are being forced to pay the higher price. However, he was quick to point out the co-operative has not raised it’s share of the price a penny through it all and the increased price is the dollar-for-dollar price being paid for the product.
Neal said the biggest thing customers can do to help is watch the levels in their tanks and call when it gets to 20 or 30 percent.
While suppliers like New Horizons may not be able to help consumers being forced to pay higher prices, emergency fuel assistance funds are being sent to agencies like the Crawford County Department of Human Services. People who qualify are being urged to sign up for help.
Roby Fuller, the Department of Human Services Economic Support Supervisor, explained that some of the 655 households already processed for fuel assistance might qualify for more assistance if they are facing higher propane bills.
Fuller noted that the state had allocated more heating assistance funds to higher use propane areas, like Crawford County. In addition to those households already processed for heating assistance who may now be facing the larger propane costs, households that qualify for assistance but typically don’t receive it, may want to apply.
Applications for fuel assistance can be made in person or through the mail at the Department of Human Services at the Crawford County Administration Building, 225 North Beaumont Road, Prairie du Chien, WI 53821 The department will also take phone-in applications for fuel at 608-326-0248.
Income guidelines for fuel assistance are “pretty high,” according to Fuller. The income limit for a one-person household is over $6,173 for the previous three months. So, for those applying in January the time period for income would include October, November and December.
In addition to Fuller, the department has five other staff members ready to process heating assistance requests.
Fuller also pointed out that funds are available for furnace emergencies. Anyone facing a furnace emergency can call 608-326-0248 or the Crawford County Sheriffs Department for after-office-hours assistance.
Additionally, Crawford County Emergency Government Director Roger Martin was at work Monday monitoring the situation.
“I know everybody is still okay in Crawford County,” Martin said of the situation.
Martin acknowledged the supply of propane nationally was very low and one question now would be how much suppliers can give customers.
“I hate using the word, but we’re looking at suppliers having to ration it. That’s what is going on in some places already,” Martin said. “Demand is just outweighing supply.”
Crawford County Emergency Government has plans for warming shelters in place, if it becomes necessary, and the Red Cross may be able to step up for motel lodging on a short-term basis, according to Martin.
While the director of emergency government is fine with people using alternative sources of heat to offset using propane, he cautions people not to do anything that would be unsafe. Martin cautioned against burning wood in chimneys that are not cleaned and ready to burn wood or bringing charcoal grills into houses and creating deadly fumes.
Roby Fuller did make one optimistic observation about the current propane shortage plaguing the state.
“Wisconsin is pretty good for making sure individual residences stay heated,” Fuller said.