HANCOCK COUNTY — County residents who might not have topped off their propane tanks before the latest polar vortex are now learning the prime directive of economics 101: Price rises with the tide of demand on diminishing supplies.
And the acceleration curve has spiked sharply – albeit in opposite directions – in recent weeks for liquefied petroleum gas, a form of propane.
The U.S. Energy Information Administration’s latest report on Jan. 20 showed Indiana residential propane nearly doubling in price over this time last year at $2.98 per gallon.
The recent onslaught of sustained frigid weather has hit Mike McPherson hard in rural Hancock County. He filled his 500-gallon tank up earlier this year, but the old farm house he recently purchased is running his tank below 50 percent, and the news for a top-off wasn’t good.
McPherson said he was quoted approximately $800 for 150 gallons of propane from Harvest Land Co-op, “and 150 gallons was all that I could get,” he said.
“It’s pretty ugly,” he said. “Who can afford that?”
While not confirming any pricing information, Lindsay Sankey, communications manager for Harvest Land, said the company is currently rationing its propane supply based on necessity and analysis that has been ongoing for some time.
“We recognized the shortage early,” Sankey said, adding that short supply signals started appearing with last year’s lingering winter. “We’ve been allocating for a long while now, and no current customer has gone without propane. We’re quite proud of that,” she said.
Harvest Land, which delivers propane from the east side of Indianapolis to Dayton, Ohio, and from Ft. Wayne to Cincinnati, has been working regionally with other suppliers in the country where demand is not as high to replenish reserves.
“We’re pulling in propane from lower Mississippi and Georgia,” Sankey said.
In addition to the long winter of 2013, industry analysts report that last year’s wet harvest season forced farmers to use more propane to dry their crops, which also combined with a December interruption in the Cochin pipeline from Alberta to the northern Midwest and bad weather that wreaked logistical havoc with moving propane throughout the country.
High export prices also are contributing to the reduced domestic supply as well.
EIA figures show a 10.2 million barrel stock over almost 19 million barrels this time last year, which translates to a present 21-day supply over a 39-day stock reserve on Jan. 18, 2013.
Given the short supply and rising demand, the Indiana Attorney General’s Office has begun monitoring propane prices at all levels of the market, according to an IAG news release.
As of Monday afternoon, the IAG had logged 10 complaints concerning propane price gouging statewide since Dec. 16, said Erin Reece, AIG public information officer.
“That’s as of right now, but as media reports increase, and people become more aware that number could increase,” Reece said.
Addtionally, legislators got involved Tuesday afternoon as Senate Bill 1 pertaining to an exemption on business personal property taxes was amended to include a provision that would give consumers a pass on sales tax for any propane purchase above $2.50 per gallon.
“They just added it about two seconds ago,” said Brady Hagerty, press secretary for State Senator John Waterman (R-Shelburn), mid-afternoon Tuesday.
Waterman joined Sens. Jim Smith (R-Charlestown) and Doug Eckerty (R-Yorktown) in proposing the amendment, which, if S.B. 1 is passed, would be effective through March and provide a retroactive credit for any sales tax already paid back to Jan. 1.
Watching consumers’ backs and passing legislation to ease the bite might help, but in reality only an improvement in the weather will warm the situation for good.
“Looking forward, I think the only way to alleviate this is for the temperatures to warm up,” Sankey said.
Residents who wish to report price concerns can contact the attorney general’s office hotline at (866) 241-9753 or at www.indianaconsumer.com.