Chris Oaks spoke with George Walton of Prism Propane and the Hancock-Wood Electric Cooperative.
Q: The shortage of wholesale propane availability in the Midwest has reached a critical level. Is that because of the prolonged extreme weather conditions?
A: The polar vortex has had an effect, no doubt. Increased demand has depleted the supply we do have more quickly than a more conventional winter would have. But the main contributing factors to this shortage were in play long before winter hit.
Q: What factors are those?
A: First, a major pipeline shut down for repairs. This pipeline happens to provide the prime source of propane to the Midwest and was unavailable to help build up inventory just before winter.
In addition to that, there was a big reallocation by the rail lines of what they would ship where. For example, some of the capacity formerly used to ship propane here is now being used to ship shale gas from Pennsylvania and eastern Ohio (to) elsewhere, reversing the flow from where we need it.
And then there is exporting. Producers are sending so much out of the country to take advantage of higher profits that there’s not enough left here at home.
Q: It sounds like someone should have seen this coming. Why didn’t someone sound the alarm earlier?
A: We believe that, at the highest level, the pipeline and rail companies were very aware of what was going on. They knew they were low. Our suppliers told us things would be tight and advised us to stock up early, but they never let on how severe it was.
Based on what we knew, we did stockpile as much as we could possibly store. And that’s where the weather came into play, depleting that inventory more quickly than we could replenish it.
The irony in all this is that U.S. propane production increased by nearly a billion gallons this past year, and 2.6 billion gallons have been added to supply since 2008. It’s not that the supply isn’t out there. We just can’t get it.
Q: You and other companies have now turned to other regions in an attempt to purchase additional supply, but given that the cold weather now extends across a large part of the country, have wholesalers elsewhere been hesitant to help out by shipping their supplies here for fear of leaving themselves short?
A: To an extent, but generally speaking, there is still ample supply in places such as the deep South. And at the end of the day, wholesalers are in business to make a profit. They’re going to sell to whoever has the money.
Of course, as you might expect, that’s driving up prices significantly.
Q: So how long do you expect this crisis to last? Are steps being taken to resolve the underlying issues you spoke of so that this doesn’t become a repeating problem in the future?
A: To some extent. For one thing, our industry leaders have taken steps to meet with the railroads to try and free up capacity to push more propane back to the East and Midwest. But the bottom line is these are long-term solutions and will do very little to alleviate the problem we have right now.
“Good Mornings!” with Chris Oaks airs from 6 a.m. to 9 a.m. weekdays on WFIN, 1330 kHz. He can be reached by email at email@example.com, or at 419-422-4545.
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