The Cause of the 2014 Propane Shortage and What it Means for You

On January 22, 2014, the National Propane Gas Association (NPGA) issued a statement regarding the propane shortage that started in the latter half of 2013. This statement confirms that the shortage is, in fact, a serious matter and that, as a propane supplier, we’re paying the price – literally. As are you, whether you use propane for residential, commercial, or automotive purposes.

According to the NPGA statement, “The U.S. Department of Energy reported that cold weather led to record-high natural gas storage withdrawals, as well as propane.”

NPGA also noted that these are the largest withdrawals in the past 20 years, and during January 2014, the record for low propane levels was broken twice.

As economic laws tell us, supply and demand allows for affordable pricing when each is relatively equal to the other. But with the propane shortage, there’s now a low supply and a very big demand. For you – and us – this means that prices are higher than ever before.

Image of: idead supply and demand graph for propane.While propane companies like our own offer competitive pricing and always take an extra step to make customers and their communities the #1 priority, the propane industry is severely limited in supply right now. This means it’s harder than ever to offer desirable pricing for propane.

However, there is one thing GasTec has during the shortage that competing propane companies we’re currently helping out don’t – propane.

That’s right – unlike many companies in our industry right now, GasTec is one of the few that has access to propane. And although we can’t supply it at the rate we’d like to, we’re grateful for it; just as our current customers are who are going through this hard time with us, paying the price but remaining loyal to the gas they love. We’re also confident that our customers will be rewarded for their loyalty, because like with all past gas shortages, a rise in supply is imminent.

During this shortage, it’s important to remember that no shortage can negate the fact that propane is still one of the most efficient forms of alternative energy in existence today.

How Did this Happen?

As previously mentioned, cold temperatures were the cause of the shortage. But there was more at play than what you think. See, shortages didn’t solely occur because homeowners were using more propane for in-home heating and other household uses. While this may have played a small part, propane heating for homes is incredibly efficient and, therefore, would unlikely ever be solely responsible for such a shortage.

Where the shortage largely stems from is the agricultural industry.

According to the NPGA statement:

“Abundant grain crops were being harvested throughout the Upper Midwest almost simultaneously this fall. Ordinarily, the harvest progresses in stages through the region but in late 2013, the harvests happened at the same time over a wide area. This was a large, wet crop which required massive amounts of propane in order to be dried prior to storage. That demand reduced propane inventories throughout the area.”

Another area of industry that caused the shortage was infrastructure – specifically, as it applies to the reparation of pipelines responsible for transporting propane. One of these pipelines mentioned in NPGA’s statement is the Cochin Pipeline that delivered 40% of propane to suppliers in Minnesota before the shortage.

The shutdown of major pipelines like the Cochin Pipeline caused a “chain reaction” across the States, leading one supplier to ask for propane from another supplier, and on and on.

This is similar to what our propane company in Bucks County is currently experiencing; however, we’re taking the necessary steps to make sure our supply doesn’t run short for our current customers.

When Will it End?

This is the question we get asked most frequently. And the truth is, we’re not exactly sure, and neither is the NPGA – an association we trust as a resource for delivering this kind of information.

What we do know, though, is that the NPGA report said 20% of U.S. propane was exported in 2013.

For the shortage to end sooner than later, this percentage needs to be addressed if it hasn’t been already. Once this happens, and once suppliers start relying less on other propane suppliers, propane prices will start returning to normal.