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Tight supply means propane prices headed upward

Last modified: 1/19/2014 11:53:33 PM
Cold weather and a strained supply have sent propane prices up recently, and that’s likely to continue through at least early February, said Joe Rose, president of the Propane Gas Association of New England.

For the first time in two years, New England has had to import propane rather than buy it domestically, and imported propane is about 80 cents more per gallon, Rose said. Propane dealers are trying to keep prices down by blending what domestic product they can get with imported propane. They are also absorbing some of the increase rather than passing it all on to customers.

“The industry is doing what it can to provide product to serve our customers,” Rose said. “But doing those things is definitely putting a pressure on the price.”

Propane was averaging $3.48 a gallon last week, according to the state Office of Energy and Planning. It averaged $3.29 a gallon in December. Rose predicted the price might climb an additional 10 to 15 cents a gallon until the second week of February.

That’s a big change for a country that has seen its domestic propane supply increase dramatically over the last couple of years, Rose said. Propane is a by-product of gas and oil refining, and the country has been doing more of both. As a result, the United States is exporting more propane than it uses, Rose said.

The problem is supply and access.

A few things are to blame, Rose said. Until this year, the largest supply of propane came to the Northeast from Texas through two pipelines owned by TEPPCO Partners, a Texas-based company. This year, the company received permission to reverse the flow of one of those pipes in order to send natural gas south. That reduced the propane supply to the Northeast by 44 percent, Rose said.

And New England has so few storage facilities for propane that local dealers could not stockpile it over the summer to satisfy customer needs.

“What we need in the Northeast is storage,” Rose said. “The industry is willing to pay for it because we want to provide price stability to our customers, and we know we need storage to do that.”

The challenge, Rose said, is persuading local communities to accept a propane storage tank. Rose said officials in Maine recently rejected a request to build a storage tank there.

The Northeast does bring in additional propane from Canada and the West by rail car. But the record-cold temperatures at the start of the year essentially halted shipments, Rose said. “It was 10 percent colder than last year and then we had those ice storms,” Rose said. “When you have ice like that, trains don’t move. Tracks freeze over.”

That left propane dealers here tight on supply and forced them to buy propane off the “spot market,” where supply is immediately available but at a higher price. Imported propane is less expensive than the spot market price, so beginning last week, New England began importing propane, Rose said. Weekly shipments of 6 million gallons are planned through the first week of February.

“This price pressure is very temporary,” Rose said. “I suspect we will be back to normal in February. At some point these trains will be able to be caught up and then we will be fine. Then propane will come in much cheaper.”

John Rymes, whose family owns Rymes Propane & Oil, said his company has already been absorbing “large portions” of the price increases this winter. He plans to continue that practice. Customers on a fixed-price plan won’t see an increase in their bills, he said. Other customers will see some increase, but Rymes said he did not know how much.

“The increase we have passed (to them) is about half of what we’ve seen in price increase,” he said.

He said his company has the advantage of having a large amount of storage capacity across the state. The company also owns rail terminals in the state, meaning Rymes can bring in propane by rail directly rather than rely on a wholesaler. He said he hopes the propane industry can negotiate with the owners of the pipeline from Texas to reopen the second pipeline for propane.

(Annmarie Timmins can be reached at 369-3323 or atimmins@cmonitor.com or on Twitter @annmarietimmins.)


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