Friday, April 18, 2014
Three ships carrying a total of 25 million gallons of propane are scheduled to arrive in New England this month and ease a regional shortage that has left dealers scrambling to meet demand and driven up prices for consumers who use the fuel for heating and cooking.
A ship with 10.4 million gallons of propane from Norway was due to dock in Providence, R.I., on Monday. Two more vessels are expected next week at the Sea-3 propane terminal in Newington, N.H.
“It won’t make all the problems go away, but it will let everyone get caught up and get back to a little more normal,” said Joe Rose, president of the Propane Gas Association of New England.
The overseas cargoes are coming just in time for Maine, which burns more than 115 million gallons of propane each year and where demand has been growing. Rose said he’s aware of suppliers that have been sending trucks as far as North Carolina and Chicago to bring propane back to Maine. That’s very expensive, and barely makes a dent in the shortage.
Rose said, “There’s just no other way to bring significant amounts of propane into New England, except by ship.”
Imported propane priced for immediate delivery is more expensive, however, and may drive costs even higher than what consumers now pay.
The statewide average price for propane used in heating hit $3.17 a gallon on Monday, according to the Governor’s Energy Office. That’s up 11 cents from last week and 50 cents since the start of the heating season. There’s also a wide price spread, from $2.49 to $4.89 a gallon, with larger dealers typically charging more, the energy office’s survey shows.
The average price in Maine is 46 cents higher than it was at this time last year, when the price was $2.71 a gallon. With the average price of oil at $3.81 a gallon, propane is more expensive on a per heat-unit basis than fuel oil, assuming typical burner efficiencies. Both are considerably more expensive than natural gas, firewood and wood pellets.
About 8 percent of Maine households use propane as their primary heat source, while 69 percent heat with oil, 14 percent heat with wood and 5 percent heat with natural gas, according to the federal Energy Information Administration.
Maine is the most affected of the New England states, Rose said, because of heavy reliance on rail and insufficient storage to provide a cushion when deliveries are interrupted.
FOUR FACTORS DRIVING UP PRICES
Propane imports have been few and far between in recent years. The Northeast shale gas boom produced a glut of domestic propane, driving prices so low that foreign sources couldn’t compete. That was good news for Maine. People and businesses found they could heat more cheaply with propane than oil in many parts of the state.
But this winter, the combination of four events changed the equation. The first three are national in scope.
Domestic propane’s price advantage over imports has prompted energy companies to ship more U.S.-produced fuel overseas. Exports cut the amount available here.
A rainy summer increased demand for propane at corn farms in the Midwest, where propane-fired heaters are used to dry the crop. Farmers began having trouble finding enough propane in the fall.
Winter weather hit early and hard. That put pressure on already-low inventories.
The fourth factor is unique to Maine, and highlights the state’s vulnerability.
Until a few years ago, more than half of southern Maine’s propane came by ship to Newington, which has a 23 million-gallon tank farm. Those imports stopped because of the price difference. Today, 70 to 90 percent of Maine’s propane arrives by rail, mostly from western Canada, through Montreal and across Quebec.
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