Why Propane Prices Are So High This Summer
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Here's your Money Briefing for Thursday, July 8th. I'm J.R. Whelan for The Wall Street Journal. Seems like you can't escape out-of-control prices. You fill up your car, you're paying through the nose. Eat at a restaurant, those prices are going through the roof. And how about staying at home and barbecuing dinner? Well, even there, the propane to fire up your grill is also burning through the cash in your pocket.
Prices have basically never been this high this time of year. And now this time of year, of course, is when a lot of people are thinking about propane because they're filling up their grill tanks and their, you know, their outdoor heaters, maybe their pool heaters use propane.
So why are propane prices so high? And is there any relief in sight? WSJ reporter Ryan Dezember has been tracking the market. We'll ask him about it after the break.
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What is driving the unusually high propane prices this summer?
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We're in the midst of barbecue season, but this summer consumers are paying close to 20% more for propane than they did last year. So what's driving prices up, and is there any shot of things cooling off? For some answers, let's bring in our reporter Ryan Dezember. Ryan, thanks for being with us.
Thanks for having me.
So Ryan, why have propane prices risen so much this year?
So propane, unlike oil, demand remained steady throughout the pandemic. It didn't plunge. And the reason for that is around the world, a lot of people use it for cooking at home. And of course, being at home meant people were cooking just as much as ever. They were also heating their homes a lot more because they weren't going to work for those that use propane as a heating fuel. The other big thing that happened is in recent years, the abundance of propane that has hit the market because of the shale boom in the U.S., has prompted chemical makers in Asia to build factories that specifically use propane to make plastics. A lot of older facilities can toggle between different feedstocks, depending on price.
A lot of these new facilities only use propane. And they're such big machines and factories, they didn't shut down during the pandemic because they're really hard to get started. So demand really remains steady around the world, while other types of petroleum demand decline.
So who's affected by these higher prices? Why is the price increase so significant?
So propane is used by a lot of by millions of American households, usually rural households off the sort of natural gas grid, and they use it for heat. They're going to be the most affected because they're coming out of household budgets. You know, if your fuel bill is twice, it might not translate to twice in retail prices. But the commodity, the wholesale price is twice what it used to be this time of year or what it has been in recent years. So you have households. You also have farmers in the Midwest who use a lot of propane to dry crops in the autumn. And you have all sorts of manufacturers who rely on propane or its derivatives and plastics.
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