Informational Meeting on Propane Reveals Supply Disruption, Cold Weather as Main Culprits in Price Spike OKLAHOMA CITY – An informational meeting on the spike in propane prices was held in the state Capitol on Tuesday by state Rep. Mark McBride. The meeting provided state legislators an opportunity to be briefed on the current state of the propane industry and why prices have shot up so sharply in the past few months. Michael Teague, the Oklahoma Sec. of Energy and Environment, was the keynote speaker and gave a presentation explaining in detail why prices shot up from around $1.50/gallon to nearly $5/gallon. Teague said the main issues creating the price spike were the combination of supply disruption from pipelines and trains to the deep penetration of polar air from the north. In addition, Teague said a rainy 2013 led to the late harvest of crops, which needed propane to be dried before delivery to market. In short, those factors combined for a sudden increase in demand, which made prices skyrocket. McBride, R-Moore, said he held this meeting in order to get state legislators updated on an issue that has been of increasing importance to constituents across the state. “When the weather gets cold, it’s important to all of us to have our homes properly heated and comfortable,” Rep. McBride said. “In many parts of Oklahoma, the only option to stay warm is via their propane tank. And because of the high spike in prices, Oklahomans are paying much more for a product that was pretty affordable before November. It has wrecked many people’s monthly budget and, because of that, people are wondering what is going on. That’s why I called this meeting.” Over the course of 90 minutes, Sec. Teague mentioned the reasons why a facility in Kansas saw propane prices spike. This facility, located in Conway, Kan., handles much of Oklahoma’s demand for propane fuel. But because of the cold weather, late crop harvests and three different transportation breakdowns – a pipeline from Canada and two different train delivery issues – this facility saw a strain on its supplies as propane retailers searched for alternative options to purchase fuel for consumers. “Basically, several different major issues popped up at the same time to create the market we have currently,” Rep. McBride said. “Most of the retailers in Oklahoma have locked-in contracts with Conway to purchase a certain amount of propane at a given time. Because of that, our rates went up because of what Conway was dealing with. “Sec. Teague informed us that up until two months ago, the national inventory was on par with the five-year average. But because of that spike, supply was drained quickly and led to the sudden high prices.” Across the state, allegations of price gouging started growing. But Teague and a representative from the state attorney general’s office denied finding evidence of any gouging in Oklahoma. “Teague did a great job filling us in on just why the market is the way it is,” Rep. McBride said. “He made it clear that the market was not being driven by gougers. Supplier’s contracts with the Kansas facility have impacted our state the most, but I’m happy to say that Gov. Mary Fallin has been proactive in ensuring normal prices return.” Over the past two months, Gov. Fallin has issued several different executive orders to declare a state of emergency relating to propane supply and price. He said these orders extended hours of service for motor carriers of propane as well as issuing a different order charging the attorney general’s office to look into possible price gouging issues. He added that Gov. Fallin has worked with the state of Texas to issue an executive order from Gov. Rick Perry to provide license waivers to allow for out-of-state trucks and operations to come to that state and receive propane from a facility there that had not seen the same price spike. This move has helped prices in Oklahoma to drop considerably in the past week. “Because of Gov. Fallin’s action to work with Texas for a solution, suppliers in the state were able to obtain propane from Texas that was priced at $1.53/gallon, as that facility had not seen the crush of demand that the Kansas location did. And now we’re seeing prices in Kansas drop as a result, down to $2.45/gallon this week.” The price fluctuations do not appear to have any impact from production issues. Teague said there has been a 41 percent increase in propane production over the last four years because of technologies related to the shale extraction technology. “I understand all the concerns of Oklahomans seeing their heating prices go up and thinking something nefarious might be at play,” Rep. McBride said. “But Sec. Teague and the attorney general’s office did a wonderful job of allaying my fears on the issue. I’m sharing this information with all Oklahomans today so they know that this spike won’t last forever and it truly was a unique confluence of incidents that led to where we are now. But it won’t last much longer, fortunately.”
Posted on: Wed, 05 Feb 2014 17:25:24 +0000