High propane prices predicted to continue


HOUSTON, Feb. 5�With propane inventories declining at all-time record rates and natural gas prices still two to three times their normal level, propane prices are expected to continue at high levels.

About 8.1 million US households use propane gas for their home heating systems. Because propane is a by-product of crude oil refining and natural gas processing, the wholesale price of propane, one of a variety of natural gas liquids (NGLs), follows the price of oil and gas.

Last summer, oil prices as high as $35/bbl held propane prices at record levels, and they have remained high as gas prices rose through the fall and into the winter.

Daniel Myers, executive vice-president and general manager of the National Propane Gas Association, Lisle, Ill, said, "Residential propane consumers have been the victims of a triple-whammy this winter, beginning with high crude oil prices last summer, high natural gas prices during the winter, and record cold weather in November and December.

''Although January's temperatures have moderated and natural gas prices have been dropping, industry experts are forecasting continued high wholesale propane prices,'' Myers said.

He said prices spiked for a short period last winter, but this winter they have been at sustained high prices�as high as $1/gal�for many weeks. Wholesale prices Monday were 63�/gal at Mont Belvieu, Tex.

In a report last week, the international consulting firm of Purvin & Gertz, Houston, said, "Natural gas prices in December were more than three times higher than average.'' The report was commissioned by the Propane Education & Research Council at the request of the two propane industry trade associations, NPGA and the Gas Processors Association.

Purvin & Gertz said that sustained high gas prices have had a major impact on both the supply and price of propane by reducing production.

"The rise in spot gas prices was much steeper than the corresponding rise in NGL prices, and as a result, gas plant production of NGL started to decline due to unprofitable operating margins at many plants,'' the study said. It also said refiners began cutting back on gas purchases and started using some of their propane production to fuel their operations instead of sending it to the market for sale to consumers.

NGPA said weekly US Energy Information Administration reports have shown a rapid draw down of propane inventories, with regional inventories below their normal range for this time of year.

According to Purvin & Gertz, the low inventories are due to a combination of the very cold weather and insufficient production. Myers said, however, that the study also found that gas prices began falling as temperatures moderated during January.

NPGA said propane industry members concurred with the findings of the Purvin & Gertz study in discussions during regional NPGA conferences Feb.1.

Myers said, "Purvin & Gertz reported that lower natural gas prices and moderating temperatures can combine to reduce consumer demand for propane and provide the economic incentives that producers need in order to increase their production of propane. While the study includes significant cautions about lower inventories and high propane prices, we are confident that the industry will be able to continue to meet consumer demands.''

Related Articles

USW union workers add two BP refineries to strike list

02/16/2015 Union workers at two BP PLC-owned refineries in Indiana and Ohio have joined the United Steelworkers union's unfair labor practice strike against t...

CNOOC cuts capital budget, starts production from Jinzhou 9-3

02/16/2015 CNOOC Ltd. is slashing its capital budget for 2015 by 26-35% to $11.25-12.86 billion compared with last year's budget. Capital expenditures for exp...

Statoil reduces capital budget by $2 billion following 4Q losses

02/16/2015 Statoil ASA has reduced its organic capital expenditure to $18 billion in 2015 from $20 billion in 2014. The move comes on the heels of a fourth qu...

Birol named to IEA executive director post

02/13/2015 The International Energy Agency’s governing board confirmed the appointment of Fatih Birol as the agency’s next executive director. Birol succeeds ...

Marcellus briefs

02/10/2015

Comment: Beware of break-even and marginal-cost analyses

02/10/2015 Shale oil and gas productivity and costs vary dramatically among the different areas of a shale formation, and the difference between owning the be...

USW union workers add two BP refineries to strike list

02/09/2015 Union workers at two BP PLC-owned refineries in Indiana and Ohio have joined the United Steelworkers union’s (USW) unfair labor practice (ULP) stri...

Bendine elected as Petrobras’ chief executive officer

02/09/2015

The board of Petroleo Brasileiro SA (Petrobras) has approved the election of Alde Mir Bendine as the company’s chief executive officer.

Union strike under way at US refineries, petchem plants

02/09/2015 The United Steelworkers Union (USW) has instituted a strike at nine US refining and petrochemical production plants following a breakdown in negoti...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


Cognitive Solutions for Upstream Oil and Gas

When Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected