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Propane Forecast For This Winter Is Better Than Last Year

Jerry Bledsoe
The outlook for the supply of propane this winter is more promising than the last.

Propane shortages in the Midwest last winter caused prices to reach a record high and left many homes without heat. With winter on its way, propane users are wondering if the shortage and skyrocketing prices will happen again.

Energy economist and program director at the Bureau of Economic Geology’s Center for Energy Economics at the University of Texas, Michelle Foss, said that right now, the outlook for this winter is good. The prices for the Midwest through the next several months are much lower than last year.

“That suggests that propane sellers, buyers and traders all expect the market to be well-supplied through the winter, but weather is highly variable,” Foss said in an email. “A good, cold winter with lots of disruptions could change things.”

Last winter, three major occurrences converged to cause the propane shortage. It was a harsh, cold winter which dried up demand; there was an increase in exports; and due to heavy rainfall, there was a late harvest which caused farmers to dry large amounts of grain before storage by using grain-elevator operators that use propane-fueled heaters.

“You just have to hope that none of these three things all converge this winter again, or I think we’ll probably have the same issue,” senior advisor at the Bureau of Economic Geology’s Center for Energy Economics at the University of Texas, Deniese Palmer-Huggins said.

Palmer-Huggins said it is hard to predict how much resources will be necessary since every winter is unpredictable.

“You are trying to make long-term decisions based on short-term commodity prices, and it’s a mismatch every time,” Palmer-Huggins said. “That’s one reason why you constantly find where infrastructures are trying to catch up, because it changes so much, and prices change, and suddenly what was an issue last year won’t be an issue this year.”

Many companies are drilling for oil instead of natural gas this year because it is more profitable. According to Palmer-Huggins, because of so many companies switching, propane storage and supply levels look normal going into the winter season.

“As these companies are going away from drilling for natural gas and drilling more for oil and liquids, which are more profitable, it means the supply of propane will go up. So that’s going to be a benefit, and that will decrease prices,” Palmer-Huggins said. “It means there will be more available, but it also means companies should go on and export it because they need to do something with it.”

Only time will tell whether this winter will be as harsh as the last, but as of now, the outlook for the supply of resources is promising.

Jami Black was an intern reporter for KRCU from 2013-2014.