U.S. Propane Prices Are Skyrocketing in a Rare Summer Rally

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U.S. propane prices have topped $1 a gallon for the first time seasonally since 2014 as domestic and overseas demand take off.

Prices have risen 36% since the start of the year in Mont Belvieu, Texas, the main trading hub for natural gas liquids in the U.S. Further stoking the rally is the fact that output of the fuel has stalled alongside oil and natural gas drilling.

U.S. Propane Prices Are Skyrocketing in a Rare Summer Rally

“The biggest factor that Covid had on our industry was that the demand lit up,” said D.D. Alexander, President of Global Gas, a national propane distributor. “People started turning up their thermostats in the winter time, they built fire pits, and a lot of people are dong things to make their house more enjoyable.”

Americans stuck at home during the pandemic also embraced grilling more than ever, leading to shortages of tanks and adding to consumption of the fuel. Grill makers are banking on friends and families to continue that trend this summer as social-distancing rules are lifted.

Propane inventories sit at 56.2 million barrels, 15% below the five-year average, according to the latest data from the Energy Information Administration. At the same time, exports stand at 1.18 million barrels a day, which is 53% above the five-year average for June.

The situation could put the supply chain in jeopardy, according to Alexander.

“If we continue to see very small builds every week and we don’t make it to 80 or 90 million barrels that could spell disaster for the domestic propane market because all of our suppliers are being exported to other countries,” said Alexander.

©2021 Bloomberg L.P.

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