Propane retailers facing environment similar to last year

The start of the 2016-17 winter heating season seems strikingly similar to the conditions experienced during the beginning of last winter. The propane industry is entering the heating season with lower-than-average residential propane prices and higher-than-average propane inventories.

Although the circumstances are comparable to last year’s, the U.S. Energy Information Administration (EIA) predicts this heating season might be even smoother for the propane industry. The high inventory levels and improved delivery networks for propane contribute to that optimistic outlook.

Last winter’s prices for residential propane reached their lowest point in at least a decade, EIA reports. During the 2015-16 winter, U.S. propane prices remained around $2 per gallon, which was about 42 cents less than prices reported during the 2014-15 winter (see the chart above).

This winter, propane prices are at comparable levels to last winter’s at just over $2 per gallon, according to EIA’s State Heating Oil and Propane Program (SHOPP). SHOPP collects state-level residential propane and heating oil price data in 38 states during the winter heating season.

In addition, propane inventories were at record-high levels throughout last winter, and that trend will continue going into this winter. Inventory levels are near or above five-year highs for this time of year. U.S. inventories reached 104 million barrels by Sept. 30, almost 4 million barrels higher than at the same time last year, according to EIA. That total was just over 100 million barrels as of Nov. 11.

Despite the lower-than-average propane prices and high inventory levels, EIA anticipates that households using propane as a primary source of heat will have higher heating costs this winter than last winter. This is based on expected increases in residential propane prices. Temperatures are also predicted to be colder than last year, based on the National Oceanic and Atmospheric Administration’s outlook for winter weather.

There tends to be a level of uncertainty regarding propane prices throughout the heating season, even for propane retailers, due to potential supply disruptions and inclement weather. To help with the uncertainty, EIA offers its Heating Oil and Propane Update webpage as a resource that lists wholesale propane prices for some states. EIA is expanding its publication of wholesale propane prices from 16 to 26 states this year.

The addition of these 10 state-level wholesale propane prices will also help federal and local governments understand price fluctuations, EIA reports. Weekly SHOPP price data is available at 1 p.m. EST on Wednesdays on the Heating Oil and Propane Update and the Winter Heating Fuels pages.

As of Nov. 14, U.S. wholesale propane prices averaged about 63 cents per gallon, 3 cents lower than the previous week but almost 14 cents per gallon more than last year’s prices, EIA reports.

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