Cold Weather Pushes Up Vt. Propane Prices

Farmers, Homeowners Hit by 18 Percent Jump in One Month

A cold snap coupled with an early-season spike in demand by farmers has put a squeeze on propane supplies, driving up the cost for Vermonters who heat their homes and cook their meals with the fuel.

The average Vermont price on Jan. 6 was $3.39 a gallon, a jump of 52 cents, or 18.4 percent, from December. It was nearly 11 percent higher than a year ago, according to the state’s monthly fuel price report. The U.S. Energy Information Administration, or EIA, says New Englanders are paying the highest prices for propane. On Jan. 6 the average price across the New England states was $3.48 a gallon, 65 cents higher than the $2.83 national average.

By Jan. 20, New England was up to $3.56 a gallon for propane, 60 cents more than the national average of $2.96. There are two reasons for the spike in propane prices: frigid weather and early-season demand. Michael Kundrath of the state’s Department of Public Service said that in the fall farmers in the Midwest drew down a significant amount of propane inventories to dry their corn harvest.

Fast forward to this winter and along comes the polar vortex, also known at the 2014 North American cold wave. The southward movement of tropospheric Arctic air last month created record low temperatures across the United States, including Vermont.

“So heating demand went up considerably over what is was last winter,” Kundrath said. Taken together, he said, it’s resulted in higher prices.

Matt Cota of the Vermont Fuel Dealers Association said propane is used by 6 million homes in the U.S. as a primary source of heat. In Vermont, he said, 40,000 homes heat with propane, or about 15 percent of all homes. But unlike fuel oil which is used solely for heating, Cota said propane is also used by 900,000 farms across the nation to dry their crops.

What made this season worse was an unusually wet summer.

“They used a tremendous amount of propane that depleted much of our reserves going into the winter,” Cota said.

He said the prolonged cold snap has compounded the problem with unseasonably cold temperatures throughout the country, even in the south. “That has driven up demand by as much as 20 percent,” he said.

Cota said the problem is more acute in the Midwest where there are transportation problems. In the Northeast, Cota said the region has ready access to propane at several points including ports in Newington, N.H., and Providence, R.I., where cargo ships bring in propane supplies from overseas.

Kundrath said New England is “in halfway decent shape, supply-wise.” In fact the U.S. is producing so much propane, Cota said, that it is exporting twice as much of the fuel as it did a year ago.

Exports acerbate the supply problem at home, but Cota said the crux of the problem is a transportation bottleneck.

“There’s not the pipeline or the rail infrastructure (nationwide) in order to get it where it needs to go after it comes out of the ground,” he said.

That bottleneck in part could be alleviated if foreign-flagged propane ships could pick up shipments from one U.S. port and deliver its cargo to another U.S. port. But under a 1920 law known as the Jones Act, foreign-flagged ships are barred from doing just that. The law was enacted to protect U.S. shipping interests. But Cota said there are no U.S.-flagged propane ships to protect today. He said the bottleneck “would still exist whether or not it’s being exported or not.”

To help speed up deliveries, Cota said the federal government has temporarily suspended its limits on the number of hours and days propane delivery drivers can work. As cold as it was on specific days last month, the average Vermont temperature in January was only 1 degree colder than normal, which is 18.5 degrees, according to the National Weather Service in Burlington.

From February through April, meteorologist Jessica Neiles said, the Climate Prediction Center is forecasting an equal chance of temperatures and precipitation being either above or below normal. The spike in propane prices has been felt most acutely by Vermonters who receive heating fuel assistance.

Richard Moffi, the state’s fuel assistance program chief, said about 25 percent of those who use LIHEAP, the Low Income Home Energy Assistance Program, rely on propane for heating.

About 28,000 Vermont families receive seasonal fuel assistance for all types of fuel, with an average annual benefit of $800.