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5:37 am
Fri January 31, 2014

Propane Prices Hit Rural Towns Hardest

Low propane supplies in the Midwest have driven up the cost of the fuel used by many rural families to heat their homes and businesses—to the point where Senator Chuck Grassley has requested an investigation by the Federal Trade Commission.

Iowa Public Radio’s Durrie Bouscaren traveled to an area in Central Iowa that depends on propane, and came back with this story. 

There aren’t many natural gas lines in Southern Marshall County, so rural residents and small towns primarily use propane for heating. The landscape is dotted with 500-gallon metal propane tanks sitting in backyards and behind businesses. Propane is bought by hundreds of gallons at a time, so if you’re running low and the price spikes a couple dollars per gallon--it’s enough to make a man ill. 

"I was sick to my stomach, you know?" said resident Larry Atcher. 

Until last week, propane prices had stayed below two dollars a gallon in Iowa. When Atcher heard propane prices were going up, he ran to check the level on his tank. Just 5% full.

"$5.11 a gallon I paid for it," Atcher said. "Just a hundred gallons just to keep me going.  That’ll probably last me, if I’m running down, maybe a month." 

That was last week—prices have since gone down to more manageable levels, but they’re still higher than usual, and it’s unclear what they’ll do next.

Atcher lives and owns a small auto body shop in the town of Laurel—a town of two hundred and forty people. So small, it’s not served by a natural gas line.  He says he’s keeping the heat down to about 55 degrees inside, and using electric heaters to stay warm.

"Elderly people and low income families are going to be hurt the worst. If you get caught without propane, do you buy propane or do you buy food. It’s going to be tough, I think," Atcher said.

According to the US Census Bureau, 36% of households using propane are in the Midwest—that’s more than 2 million homes.  And it’s been a cold winter.

At a special meeting of the Laurel city council–-where Atcher also happens to be mayor--councilors mulled over how to fit the higher prices into their budget for next year.

The town contracts propane every year to lock in a lower price in the summer, but can only prepay as much as they used last year. Because last winter was warm, and this one has had a series of cold snaps, city clerk Lynne Gummert says the town has already used more than half of what it’s prepaid. And she’s worried about residents, too.

"I’ll be curious, are we going to have issues with people being unable to pay their utility bill for the city, for water and sewer, because they have this extra thing," she mused at the meeting.

In the end, the council budgeted to pay about 3 dollars a gallon.

At Parks Gas in the nearby town of Le Mars, prices are going back down from last week’s overnight spike. Owner Larry Parks says that for many rural homeowners, propane is their only option to heat their home. It’s less cost effective for a utility company to run a natural gas line to an area that won’t have many customers—so sometimes, they don’t.

"A few years ago they ran a few small towns in the area. It’s pretty expensive to run a line very far. [For most residents], it’s their only option. That or cut wood like the old days, and nobody wants to do that," Parks said.

Parks says local distributors like him are letting customers buy smaller amounts of propane to keep them going while the prices stay high.  He says the extra deliveries and high prices from suppliers are going to end up costing him. 

"Our inventories are at a record low. Lowest this country’s ever been in the Midwest is 5 million, and now we’re sitting at 8 million barrels. And the five million was at the end of winter," Parks said. According to the U.S. Energy Information Administration, the Midwest region has 8.7 million barrels in reserve. 

And in the meantime, rural residents will be keeping their thermostats turned low in the cold.

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