Propane Price Hangover

April 1, 2014 09:39 PM
Propane Price Hangover

The evidence is clear: Propane suffered a nasty price hike this winter, with average prices in January topping $4 per gallon or higher in the Midwest, nearly double the normal price. Since then, the initial sticker shock has worn away to concerns about whether this shift was due to short-term factors or signals a longer-term shift toward higher prices.

The situation has been blamed on multiple causes, including pipeline tie-ups, logistics/transportation issues, colder-than-normal winter weather, even an uptake in propane use to dry corn, says Mark Leitman, director of business and marketing for the Propane Education & Research Council (PERC).

"There isn’t a shortage of propane—in fact, the exact opposite is true," Leitman says. "We’re already seeing wholesale prices down. We’re going to put this behind us, especially as we move into the summer months."

Leitman says that while 2013/14 prices were unusual, it was a natural fallout from market circumstances. Farmers can better prepare for future price increases by closely following potential market signals. "Commun­icate early and often with your propane provider. Lock in prices like you would any other essential input on the farm," he says.

So what do longer outlooks have in store? Propane prices tend to follow oil prices, so that’s a natural place to begin looking. The Energy Information Administration and AmeriGas have both indicated the most likely scenario for price trends from 2010 to 2020 will include average annual price gains of about 5%, with another 1% annual average price gains projected through 2035. Leitman says that with long-term prices more likely to rise, now is the right time to take advantages of certain PERC grants.

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