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February 5, 2001

Price of Propane Making It Harder to Keep Warm By PETER T. KILBORN -------------------------------------------------------------------------------- Rodney White for The New York Times

NDIANOLA, Iowa, Feb. 2 — White is the color of cold in Iowa this winter, with perennially white skies folding into silent white pastures and fields of corn stubble. Behind white clapboard farmhouses, only the white tanks, shaped like snub-nosed submarines, offer protection from a winter that began as the coldest recorded around here and has almost two months to go.

The tanks contain a liquefied gas called propane, the sole source of heat for 149,000 rural homes in Iowa, or 14 percent of all homes in the state, and for 8 million others across the upper Midwest and the Carolinas. Normally a manageable expense, accounting for up to 4 or 5 percent of a family's income, the price of propane has jumped to its highest levels, doubling or tripling in one year in many places. For many households, especially those on low and fixed incomes, filling the tank for a month can cost more than the rent or the mortgage payment.

"It ticks you off when you get shafted like that, and you can't do anything about it," said Norman Heck, 69, who after 10 years has all but completed building his cedar- sided retirement dream house outside Indianola, 25 miles south of Des Moines. Spotless, meticulously decorated, the house has three bedrooms, a pantry and a soaring cathedral ceiling, with a wall of glass overlooking the family's 40 hilly acres of land.

"It used to cost $400 to heat this place, all winter," Mr. Heck said. "Now we're looking at $1,700."

Mr. Heck had some good jobs over the years, most of them in construction. But after rearing seven children, he and his wife, Janet, 67, live on a fixed income, most of which is their Social Security benefit. Without a penny of debt, they thought they could get along.

Because of the cost of propane, the Hecks have been able to turn for help to a federal energy assistance program for the poor that picked up $360 of their January bill. But they will need another delivery in two or three weeks and are ineligible for more aid, so they are bailing out.

"They've priced us right out of here," Mr. Heck said. "We're going to sell this house and build a smaller one. It was great while it lasted."

In the nation's cities and suburbs, propane is an incidental fuel for blowtorches, for cooking on outdoor grills or for running the few vehicles that are propane-powered. But in the country, propane is prized as historically cheap, clean and versatile.

A liquid that vaporizes at temperatures as low as 44 degrees below zero, propane heats homes and barns, cooks, dries crops and runs clothes dryers, water heaters, irrigation pumps and some tractors. And the rare spurts in price take a disproportionate toll on people with modest incomes.

In Iowa, as in most states, no one requires a propane company to deliver to a customer who cannot pay. The propane companies say it is uneconomical to deliver fewer than 200 or 300 gallons, so a customer who can pay for only 100 is out of luck.

In Thursday morning's ear-burning cold, yet another blizzard was sweeping snow over the ice-packed gravel road to the weathered and white century-old home of Michaela Prexl, 29, in Carlisle, 12 miles southeast of Des Moines. Ms. Prexl lives there with her 4-year-old son, 2-year- old niece, mother and three dogs.

Ms. Prexl cannot work. Three years ago, she said, "I crushed my legs in a car wreck." She collects about $8,000 a year in disability benefits, food stamps and cash assistance. She does not have good credit or much money in the bank, so she cannot charge her gas purchases or sign a contract in the summer for her winter deliveries, locking in lower prices. Before the March thaw, she is likely to have spent around $1,100, or nearly 14 percent of her income, to keep replenishing the 1,000-gallon tank outside the kitchen window.

On the kitchen table, she spreads out three years of receipts from Warren County Oil in Indianola, her supplier. She bought about 750 gallons in the winter of 1997-98, for which she paid an average of 60 cents a gallon, or $450. In October 1998, detecting a bargain with the price down to 50 cents, she bought 700 gallons for $350. That was enough to carry her through the ensuing mild winter.

But by December 2000, the price had almost doubled, to 98 cents. She paid $264.60 for 270 gallons. "On Jan. 10, I was empty again," she said. "I had to put 350 in there." By now the price was $1.24, so she paid $434. This week, Warren County Oil's price had slipped a bit, to $1.16. But with February barely begun, she is likely to need another 500 gallons.

Like the Hecks in Indianola, Ms. Prexl is getting some help — a grant of about $480 — through the federal Low Income Home Energy Assistance Program.

Jerry McKim, chief of the bureau that manages the program in Iowa, said 206,000 households were eligible for aid because their incomes fall below $25,575 for a family of four, or 150 percent of the federal poverty line. Of those households, he estimated that 75,000 will have applied by March, 13,000 more than last year, and that 15 percent of those that apply burn propane.

"I have taken hundreds of calls," Mr. McKim said. "I get grown men who all say the same thing: `Never in my life did I think I couldn't make it on my own.' Elderly ladies call. Their voice cracks. They've got a monthly income of $500 and a bill for $800. They think their only alternative is to sell their homes. That's what's going on. We're not talking anecdotes here."

Because of the season's unusual cold, the Department of Energy's Energy Information Administration reported this week that nearly 19 million gallons of propane, almost a third of the entire national supply on hand in October, were burned in December, the most ever burned in one month. But there are other reasons, too, for the jump in prices.

A byproduct of oil and natural gas processing, propane has been caught up in the supply-and-demand upheaval in the nation's sources of energy. High natural gas prices leave producers with little incentive to extract propane from their gas, said Daniel N. Myers, executive vice president of the National Propane Gas Association.

And rather than pay high natural gas prices for fuel for their own processing, oil refineries switched to using the propane that they produce and normally sell, thus diminishing the supply. "And they're still doing that," Mr. Myers said.

Hundreds of miles down the line from the refineries and processing plants is Indianola. Routinely, LaVerta Foust, Mr. McKim's area supervisor, calls propane dealers, shopping for prices for her clients. The 16 dealers she called on Monday quoted prices ranging from $1.10 to $1.49 a gallon.

Warren County Oil has one of the lower prices, at $1.16. The company is a threadbare-looking business, occupying a single-story yellow brick building the size of a gas station in the center of Indianola. Joe Bell, the general manager, says he tries to accommodate customers who have trouble paying so that he can deal with a squeeze of his own.

When Mr. Bell picks up propane at his supplier's depot in Des Moines, he is given 10 days to pay. "Most of our customers expect 30 days to pay," he said.

Among Warren County Oil's customers is Joyce Mastin, who recently moved to Indianola. Her husband, David Mastin, works as a store manager at a mall in Des Moines while she stays home with their four children.

With little credit in town as yet, the Mastins cannot open a charge account with the company. So to pay the $243.60 charge for Monday's delivery, Ms. Mastin said, "I had to postdate a check, to Feb. 9. They suggested that."

http://www.nytimes.com/2001/02/05/national/05PROP.html?pagewanted=all

-- Martin Thompson (mthom1927@aol.com), February 05, 2001

Answers

February 5, 2001

Propane Supplies Down and Prices Up on East Coast By THE NEW YORK TIMES

he price of propane has risen sharply in New York in the last year. Last month, the average price in the state for a gallon of propane was $1.71, according to the New York State Energy Research and Development Authority. The price for the same amount was $1.36 the year before.

Some of the steepest price increases have come in the northern and western parts of the state, where many people use propane to heat their homes. In the region that includes Albany, Fulton, Montgomery, Rensselaer, Saratoga, Schenectady, Schoharie and Washington Counties, prices are up 34 percent over the same time last year.

The supply of available propane has dropped markedly. On the East Coast, propane production is down by more than 16 percent. In the central Atlantic region, which includes New York and New Jersey, stocks at bulk terminals are down by 50 percent. In the same region, imports are at the same level as last year.

http://www.nytimes.com/2001/02/05/national/05PBOX.html

-- Martin Thompson (mthom1927@aol.com), February 05, 2001.

Button up your overcoat, when the wind is free! But propane isn't. Feel sorry for those folks in Iowa and it's likely to get worse. In Sedona, AZ it's up 36% since August, 2000 at $2.445/gallon with tax (can't buy it without and it goes up proportionally). Probably higher this month.

-- Warren Ketler (wrkttl@earthlink.net), February 05, 2001.

Monday February 5, 12:39 pm Eastern Time Press Release SOURCE: National Propane Gas Association Natural Gas Prices Continue to Keep Propane Prices High, Says NPGA LISLE, Ill., Feb. 5 /PRNewswire/ -- With propane inventories declining at all-time record rates and natural gas prices still two to three times their normal level, industry experts predict that propane prices will continue at their unprecedented high levels.

Approximately 8.1 million households use propane gas to fuel their home heating systems. Because propane is a by-product of crude oil refining and natural gas processing, the wholesale price of propane, one of a variety of natural gas liquids (NGLs), follows the price of crude oil and natural gas. Last summer, crude oil prices as high as $35 per barrel held propane prices at record levels, and those levels have remained high as natural gas prices rose through the fall and into winter months.

``Residential propane consumers have been the victims of a triple- whammy this winter, beginning with high crude oil prices last summer, high natural gas prices during the winter, and record cold weather in November and December,'' observed Daniel N. Myers, Executive Vice President and General Manager of the National Propane Gas Association (NPGA), Lisle, IL. ``Although January's temperatures have moderated and natural gas prices have been dropping, industry experts are forecasting continued high wholesale propane prices,'' Myers said.

In a new report released last week, the international consulting firm of Purvin & Gertz, Houston, TX, found that ``natural gas prices in December were more than three times higher than average.'' The report, The Near-Term Outlook for U.S. Propane Supplies, was commissioned by the Propane Education & Research Council at the request of the two propane industry trade associations, NPGA and the Gas Processors Association. Purvin & Gertz found that the sustained high natural gas prices have had a major impact on both the supply and price of propane by reducing production.

``The rise in spot [natural] gas prices was much steeper than the corresponding rise in NGL prices, and as a result, gas plant production of NGL started to decline due to unprofitable operating margins at many plants,'' according to the study. The study also noted that refiners began cutting back on natural gas purchases and started using some of their propane production to fuel their operations instead of sending it to the market for sale to consumers.

Weekly reports issued by the U.S. Energy Information Administration (EIA) have shown a rapid draw down of propane inventory levels, with regional inventories below their normal range for this time of year. According to Purvin & Gertz, the low inventories are due to a combination of the very cold weather and insufficient production to replenish supplies. Myers emphasized, however, that the study also found that natural gas prices are starting to back down as temperatures have moderated during January.

Industry members concurred with the findings of the Purvin & Gertz study in discussions during the second series of four regional NPGA Propane Supply/Demand Audio Conferences held February 1, 2001.

``Purvin & Gertz reported that lower natural gas prices and moderating temperatures can combine to reduce consumer demand for propane and provide the economic incentives that producers need in order to increase their production of propane,'' Myers said. ``While the study includes significant cautions about lower inventories and high propane prices, we are confident that the industry will be able to continue to meet consumer demands.''

NPGA is the national trade association for the propane gas industry with a membership of 3,700 propane producers, wholesalers, and retail marketers, as well as the manufacturers and distributors of associated equipment and appliances. NPGA also represents 38 affiliated state or regional propane gas associations and members in 28 foreign countries.

SOURCE: National Propane Gas Association

http://biz.yahoo.com/prnews/010205/il_npga_ga.html

-- Martin Thompson (mthom1927@aol.com), February 05, 2001.