Winter Energy Prices to Remain High
Propane Industry Advises Consumers: Be Prepared. Fill Your Tank Early
September 6, 2000
Lisle, IL - Driven by a variety of supply and demand factors, virtually all fuel prices rose sharply during the first half of 2000: heating oil, gasoline, natural gas and propane. Given the current market status and predictions of a colder winter, experts predict that prices are likely to remain high during the upcoming winter heating season. In an effort to hedge against these high winter prices, the propane industry is encouraging consumers to take early precautions by filling up their propane tanks and carefully maintaining their propane home appliances.
"Propane customers can help shield themselves from the expected high winter costs by getting their tanks filled now, before the weather turns cold," said Daniel N. Myers, Executive Vice President and General Manager for the National Propane Gas Association (NPGA). "Some consumers might be postponing deliveries in the hopes of lower prices, but those lower prices are not expected during the coming heating season."
Colder Winter Ahead
After two years of above-normal temperatures, colder temperatures are expected this winter. Weather has a large impact on heating fuel demand. If it's cold, consumers will use more, and prices are likely to increase.
In addition to the weather, continuing high crude oil prices are expected to impact all energy prices this winter. According to Purvin & Gertz, Inc., an international energy industry consulting firm headquartered in Houston, Texas, the following additional factors are expected to influence propane prices this winter:
Low U.S. propane inventory levels. As of July 31, U.S. propane inventories were 5.5 percent lower than a year ago and the lowest since 1996. Primary stocks are continuing to build, but experts are concerned that distributor and customer storage may be low. They are urging customers to fill up now.
Record high natural gas prices. The American Gas Association has warned that U.S. consumers could face significantly higher natural gas prices this winter - an average increase of more than 30 percent over 1999. This could impact propane prices because 48 percent of domestic propane is produced from natural gas plants.
Low propane imports. Total U.S. propane imports have dropped over the last two years, from over 4 million barrels (MMB) at this time in 1998 to approximately 0.5 MMB this year. Imports, which mostly come from Canada, make up 10 percent of the U.S. supply.
Continued growth in Far East propane demand. China had the largest growth in propane demand in the Far East, with an annual growth rate of more than 19 percent. At the same time, the countries that comprise Southeast Asia had a total growth in demand in excess of 10 percent, and demand in India has been growing at nearly 9.5 percent a year.
A booming Mexican market. Mexico is now the third largest propane consumer in the world, and demand continues to grow by 3 percent annually.
Middle East petrochemical plant startups that also consume propane. Propane demand in the Middle East is growing faster than the world average. Between 1990 and 1999, demand in this region increased by just under 8 percent per year.
There is ample propane supply worldwide, but prices are what drive product distribution. U.S. suppliers compete in a global market for propane. Thus, if there should be a sudden, heavy demand for propane due to colder weather, prices could escalate rapidly.
Even in light of the current situation, the bottom line is efficiency. The Propane Education & Research Council has developed a set of "Energy-Saving Tips For Your Home ". These are easy and practical ideas that homeowners can implement to cut their energy bills.
"Propane provides consumers with a clean, efficient, and cost effective alternative home energy source," said Roy Willis, president of the Propane Education & Research Council. "To ensure a warm home and steady energy supply during harsh winter weather, homeowners should stock up on propane and carefully maintain their propane appliances to cut costs," added Willis.
For a detailed explanation on the potential impact of higher propane prices, visit the Purvin & Gertz, Inc. website at http://www.purvingertz.com/ogj062600.html.
NPGA is the national trade association for the U.S. propane gas industry. With a membership of more than 3,800 companies in all 50 states, 38 affiliated state or regional associations, and members in 28 foreign countries, NPGA represents every segment of the propane industry. Over 90 percent of the United States' propane supply is produced domestically, and 60 million Americans choose Propane. Exceptional Energy as their energy source. For more information call (630) 515-0600 or visit www.npga.org.
The Propane Education & Research Council was authorized by the U.S. Congress with the passage of the Public Law 104-284, the Propane Education and Research Act (PERA), signed into law on October 11, 1996. The mission of the Propane Education & Research Council is to promote the safe, efficient use of odorized propane gas as a preferred energy source. For more information about the Propane Council, please call 202-452-8975 or visit the website at www.propanecouncil.org.