U.S. propane market prepares for ‘Armageddon’ amid price spikes and supply shortages

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Directly above shot of flame on gas stove burner

With propane prices almost doubling this year and supplies so scarce, the market prepares for a possible “Armageddon” heading into the winter months, according to a report by Bloomberg.

In June 2021, prices for propane topped $1 per gallon for the first time seasonally since 2014 with more demand both here and overseas. An estimated six million American homes use propane.

Experts have said more people staying home during the pandemic may have played a role in higher demand, with some using the gas to heat their pools or light up their grills.

The US Energy Information Administration’s latest report on propane shows a slow but steady increase in prices for the gas:

“Residential propane prices averaged more than $2.69 per gallon, more than 3 cents per gallon above last week’s price and more than 90 cents per gallon above last year’s price,” the site reported. “Wholesale propane prices averaged more than $1.63 per gallon, more than 1 cent per gallon above last week’s price and 94 cents per gallon above last year’s price.”

Edgar Ang, an IHS Markit analyst, says stockpiles of the important heating fuel may have already topped out for the year and could be stretched thin in the near winter season.

In the report by Bloomberg, Ang says prices for the first quarter of 2022 are already far above later supplies, saying, “it may indicate players are preparing for propane-market armageddon.” He added that some areas could see outright shortages before winter ends.

To add to the stress, Poynter says some weather forecasts are already calling for a colder than normal winter, thanks to the La Nina effect. Experts call for an 87% chance of the system bringing an early and harsh winter season.

In a report by Poynter, the Energy Department said the following:

  • We expect that the nearly half of U.S. households that heat primarily with natural gas will spend 30% more than they spent last winter on average — 50% more if the winter is 10% colder-than-average and 22% more if the winter is 10% warmer-than-average.
  • We expect the 41% of U.S. households that heat primarily with electricity will spend 6% more — 15% more in a colder winter and 4% more in a warmer winter.
  • The 5% of U.S. households that heat primarily with propane will spend 54% more — 94% more in a colder winter and 29% more in a warmer winter.
  • The 4% of U.S. households that heat primarily with heating oil will spend 43% more — 59% more in a colder winter and 30% more in a warmer winter.

Household energy costs are expected to rise across the board, but propane will still take the cake on the highest price point, according to this graphic from the U.S. Energy Information Administration and Axios.

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