According to the Energy Information Administration, the average wholesale price per gallon of propane is currently a dollar higher than this time last year, having risen from around $0.60 last October to $1.60 now. In some places, such as Mont Belvieu in Texas, the price is three times higher than in past years.
The Wall Street Journal reported that propane costs might rise an average of 29% this winter, with some areas paying 56% more even if the season is hotter than usual. If this season is colder than average, consumers could see their costs doubled. This could mean an increase of $1600 to $2000 in home heating costs, depending on the region.
The price surge is terrible news for the 5% of American homes heated by propane, mostly in rural areas. It is expected to increase the prices of other products and services since propane powers most construction equipment. Propane is also a key ingredient in plastic polypropylene.
Though all heating systems are expected to be more costly this winter, natural gas and electricity are somewhat protected from the market changes in ways propane is not.
Propane stockpiles are 19% lower than average for this time of year because sellers don't see a reason to hold back when the prices are already great. Providers usually wait until the weather turns and demand increases to start selling domestically but have started exporting propane to places such as India and China throughout the summer and early fall.
The U.S. is the world's largest exporter of propane, but supply is currently so tight that research firm IHS Markit suggests that the market could be gone for "armageddon" this winter, Bloomberg reports. Robert Stier, head petrochemicals analyst at S&P Global Platts, tells the Journal that high demand for propane from abroad—including China, where it is used to make plastics—kept prices high through the summer, giving traders little incentive to stockpile the fuel for winter as they would in a normal year.
Stier predicts that domestic propane inventories are so low that there may be times when propane is unavailable at any price. "You have no alternative for heat," he says. "Your options: Turn down the thermostat, put on a sweater, or burn wood in a fireplace." Dozens of senators have asked the Biden administration to increase funding for a Health and Human Services Department program that helps low-income families and seniors with their energy bills.