Sky high and climbing; Propane costs surprise customers and gas companies alike

By BOB QUICK/The New Mexican - 1/16/2001

December, said Jennifer Sandoval, was the worst month so far, but that doesn't mean things are going to bet better any time soon.

"It's really a scary situation," said Sandoval, who's the manager of Santa Fe Propane. "It's unbelievable - the price of propane just keeps going up."

The price of propane, which is used by people living mainly in rural areas not served by natural gas lines, is now about $1.75 per gallon and still rising.

Propane prices are directly tied to crude oil production, and costs have risen as the price of crude oil and other petroleum-derived products have increased since 1999.

The Department of Energy projects an increase in some markets to $1.80 or $1.90 by the end of winter. But that may be too low.

"In California, it's already $2 a gallon," Sandoval said. "And there's nothing we can do about it. We've tried to tell people to write to their Congressman or to the governor or to people who can make a difference."

Sandoval said many people became accustomed to the relatively warm winters Northern New Mexico has had in recent years, which resulted in lower propane use and lower energy bills.

That's all changed with the winter of 2000/2001.

With the sub-freezing weather, "People are going through propane so rapidly, it's unbelievable. An insulated home makes a big difference."

Sandoval said some customers are using 100 gallons of propane and more every two weeks, which means their monthly bills approach $400.

"How can people afford to fill a 500-gallon tank?" she said. "People have to decide whether they pay their mortgages or heat their homes. It's one or the other."

Some customers are angry with the propane companies, Sandoval added, while others think it's the environmentalists' fault.

"They blame it on everybody, but who knows who's really responsible?" she said.

Robert Gonzales, a customer-service representative at Ferrellgas, has also heard remarks from customers about the high price of propane.

"Of course there are some complaints," he said. "It's only natural. but it's winter time, and people need propane, so they order it.

Gonzales said the price "is the highest I've ever seen it. Last year it was $1.129, and that was the highest at that point." The price later rose to $1.359, he added.

Gonzales said his company advises customers to make as much use as possible of their wood stoves to cut down on their propane consumption. There are also programs available that help customers who are having a hard time paying their propane bills, he said.

And contrary to what some consumers say, Ferrellgas and other propane dealers are only passing on the cost of the propane to their customers, not gouging them and making excessive profits.

"Our mark-up on propane is actually lower in winter than it is in summer," he said. "We make more per gallon in the summer."

Some propane users this winter have been turning to the Salvation Army for help with their energy bills, including propane expenses, said Viola Lujan, the agency's administrative assistant.

"We've had huge requests from the Empty Stocking Fund (a holiday fund drive) and Project Unite," she said, referring to a holiday fund drive and a utility-aid program sponsored by Public Service Company of New Mexico, repectively. "The combination of cold weather and higher heating costs are what are bringing people in."

Lujan said the average bill she is seeing from aid applicants is about $225 per month, while the maximum grant from Project Unite is $130.

The DOE says propane inventories from the summer generally run low by January, while demand remains constant. About 47 percent of propane is used to make plastics and other materials, while residential use accounts for 39 percent. Agriculture uses about 8 percent.

Information from the Associated Press was used in this story.

http://www.santafenewmexican.com/NEWS/business.las

-- Martin Thompson (mthom1927@aol.com), January 16, 2001

Answers

It was reported as far back as last summer that propane supply inventories were running 50% under the year prior.

I wonder why this would surprise anybody.

-- Wellesley (wellesley@freeport.net), January 16, 2001.