By Kim Smiley

Propane shortages and skyrocketing prices in parts of the United States have made it difficult for some homeowners to affordably and consistently heat their homes this winter.   The brutally cold winter many regions are experiencing is also worsening both the causes and effects of the shortages.

A Cause Map can be built to help understand this issue.  Cause Maps are a visual format for performing a root cause analysis that intuitively lay out the causes that contributed to an issue to show the cause-and-effect relationships.  To view a high level Cause Map of this issue, click on “Download PDF” above.

Why have there been recent propane shortages in regions of the United States?  This question is particularly interesting given the fact that propane production in the United States has increased 15 percent in the past year.   One of the reasons that propane prices have dramatically increased is because of a spike in demand.  There was a larger than normal grain crop this fall, which was also wetter than usual.  Wet grains must be dried prior to storing to prevent spoiling and propane is used in the process.  Local propane supplies were depleted in some areas because five times more propane was used to dry crops this year than last.   About 5 percent of homes in the United States depend on propane for heat and the unusually frigid temperatures this winter have resulted in additional increases in propane demand.

In addition to the increase in demand, there have been issues replenishing local supplies of propane quickly enough to support the increased demand.  There have been some logistical problems transporting propane this winter.  The Cochin pipeline was out of service for repairs, limiting how quickly propane could be transported to areas experiencing shortages.  There were rail rerouting issues that impacted shipments from Canada.

Additionally, many are asking questions about what role propane exports have played into the domestic shortages.   Propane exports have quadrupled in the last 3 years.  New mining techniques and improved infrastructure have made exporting propane to foreign markets more lucrative and companies have begun to ship more propane overseas. As more propane is shipped to foreign markets, there is less available for use in the United States.

The propane shortages are an excellent example of supply and demand in action.  Increasing demand combined with decreasing supply will result in higher prices.  Unfortunately addressing the problem isn’t simple. There are very complex logistic and economic issues that need to be addressed, but if people don’t have access to affordable heating, the situation can quickly become dangerous, or even deadly.  In the short term, lawmakers are taking a number of steps to get propane shipped to the impacted areas, but how the US chooses to deal with this issue in the long term is still being debated.