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Wednesday, January 8, 2014 - 4:30pm

As Temps Drop, Gas Prices Rise, Along With Demand For Fuel

Updated: 11 months ago.
Propane cylinders sit on the grounds of Blue Rhino, a propane gas company, in Tavares, Fla. In the Midwest, farmers needed more propane for crops that came in later than normal.

Cold weather this week has boosted demand for heating fuels across the country. Natural gas prices are up, especially in the Northeast. At one point prices for natural gas into New York City jumped nearly tenfold from an average winter price of $5.68 per million BTU to $55.49, according to Bentek Energy, an analytics company.

Part of the problem is getting the gas from where it's produced these days, in places like Western Pennsylvania to the population centers where it's burned. Sometimes there just aren't enough pipelines to meet the demand. In those cases utilities and other users start bidding up prices. Regulated utilities are willing to pay a lot to keep the gas flowing.

"You can't let Grandma freeze," says Anne Swedberg, a senior energy analyst for Bentek, repeating a phrase heard in the industry. "They [utilities] are required to continue to purchase gas to maintain their systems at whatever price, so that they can keep the lights on for Grandma and the heat on for Grandma," Swedberg says.

Analysts are still sorting out what happened when prices reached their peak. But Swedberg says in addition to pipeline constraints it appears a cold-weather phenomenon called "freeze-off" was a problem.

"Freeze-off is where the gas is not able to get out of the well to enter the pipeline," Swedberg says.

In parts of the country where natural gas isn't available, propane is often used for heating. And this year it's been in short supply too. The National Propane Gas Association says there are a few reasons for this.

"This year we're actually having winter," says Jeff Petrash, vice president and general counsel for the association. The past few winters were warmer than normal but this year Petrash says demand for all heating fuels oil, propane and natural gas is significantly higher.

On top of that, farmers in the Midwest needed more propane for crops that came in later than normal.

"Most people don't realize that huge amounts of propane are used in grain-drying," Petrash says. "So we had a large and later-than-normal grain harvest that called for large volumes of propane just as we were entering the winter heating season."

Earlier this week Oklahoma Gov. Mary Fallin declared a state of emergency in response to the propane shortage in her state. She joined 18 other states in issuing executive orders. Normally propane truck drivers are restricted in how long they can work each day. But for the next week or two drivers will be exempted from those rules. And in Oklahoma out-of-state suppliers will have an easier time bringing fuel in to meet the increased demand.

Copyright 2014 NPR. To see more, visit http://www.npr.org/.

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