Propane Prices are Heating Up

By Pat McGonagle, Vice President & Chief Financial Officer

As we head into the winter of 2021–22, retail prices for energy are at or near multiyear highs in the United States.

Approximately 5% of all U.S. households heat primarily with propane. The U.S. Energy Information Administration (EIA) expects the average household bill for propane consumers will rise this winter. The higher price follows changes to energy supply and demand patterns in response to the COVID-19 pandemic. The EIA expects households across the United States will spend more on energy this winter compared to the past several winters because of higher energy prices, lower inventory levels and the assumption of a slightly colder winter compared to last year. EIA defines the winter season as the period from October through March.

Factors Affecting Propane Prices

As of October 15, 2021, wholesale propane spot prices at Mont Belvieu, Texas, the main U.S. propane hub near Houston, averaged $1.45 per gallon(g) as compared to $.53/g on October 15, 2020. This represents an increase of $.92/gal (174%) year over year. Residential propane prices this winter are projected to be the highest since the winter of 2013–14 as changes in wholesale propane prices pass through relatively quickly to retail propane prices.

Propane inventories typically build between April and October before drawing down in late-September or October when agricultural use of propane rises and temperatures begin to fall. U.S. propane inventories at the end of September were 20% less than the fiveyear average and 29% less than at the same time last year. The low inventories are primarily the result of increased global demand for propane, relatively flat U.S. propane production and low global propane production because of limited oil supplies from OPEC+ countries. Based on the most recent winter forecasts, it is assumed temperatures for the winter of 2021–22 will be slightly colder than last winter for the midwest and more similar to the average winter of the previous 10 years. Cold weather can affect household heating expenditures in two ways. First, it raises the amount of propane required to keep a house at a specific temperature. Second, because it raises demand and could cause supply disruptions, cold weather can cause propane prices to rise, a development that can be more acute in a time of low inventories.

Fuel expenditures for individual households are highly dependent on the size and energy efficiency of individual homes and their heating equipment, along with thermostat settings, local weather conditions and market size. Visit our website myenergycoop.com/save to review our energy savings tips before the cold weather arrives and learn ways to become more energy efficient.

How We Price Propane

NGO Propane adheres to a detailed planning model throughout the year. The Cooperative works with two suppliers to secure both price and physical transportation of the product throughout the summer months to ensure we can meet our members needs during the upcoming winter season. We continue to focus on providing affordable fixed-price propane with metered service. Our metering option allows members to pay for only the propane they use each month and avoid costly tank refills. Please call our office at 1-800-255-6815 to discuss your propane options.