Why Propane Prices Are So High This Summer

Summary

---

WSJ Your Money Briefing — Summary

Episode: Why Propane Prices Are So High This Summer
Date: July 8, 2021
Host: J.R. Whalen
Guest: Ryan Dezember, WSJ Reporter

---

Episode Overview

This episode of Your Money Briefing explores the unexpected summer surge in propane prices, dissecting the underlying market dynamics and what they mean for American consumers. Host J.R. Whalen interviews WSJ reporter Ryan Dezember to explain why propane, often associated with summer barbecues and rural heating, is currently more expensive than usual, and how listeners might prepare for further price movement.

---

Key Discussion Points & Insights

1. The Unusual Spike in Propane Prices

• Unprecedented Pricing:
  • Propane prices are up nearly 20% compared to the previous year, reaching levels usually only seen in winter.
  • Quote (Ryan Dezember, 00:57): “Prices have basically never been this high this time of year.”
• Why the Demand Stayed High:
  • Global demand for propane didn’t drop during the pandemic, unlike oil.
  • Propane is used for home cooking and heating worldwide, which remained steady as people stayed home.

2. The Changing Propane Market

• Shale Boom and Global Demand:
  • The U.S. shale boom increased supply, which encouraged Asian chemical manufacturers to build propane-dependent factories.
  • Many new Asian facilities are “propane only” and continued operating through the pandemic, making global demand resilient.
  • Quote (Ryan Dezember, 02:03): “They’re such big machines and factories, they didn’t shut down during the pandemic... demand really remains steady around the world while other types of petroleum demand decline.”

3. Who Is Most Affected?

• Impacted Groups:
  • Millions of typically rural American households, especially those not on the natural gas grid and using propane for heating.
  • Farmers, who use propane to dry crops in the autumn.
  • Manufacturers relying on propane and its plastic derivatives.
  • Industrial users: warehouses, ports, and facilities powered by propane-fueled forklifts.
  • Quote (Ryan Dezember, 03:04): “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.”

4. Seasonality and the Current Market

• Atypical for Summer:
  • Propane’s high prices are out of season; normally, summer prices dip due to lower demand.
  • The federal government doesn’t even track summer propane prices because demand is generally slow.
  • Quote (Ryan Dezember, 03:54): “As far as we can tell, prices have... basically never been this high this time of year.”

5. Impact of the July 4th Rush

• Grilling Demand Is Minor:
  • The July 4th barbecue rush for small grill tanks is not significant enough to affect the overall propane price.
  • The bigger issue is the supply of canisters, which was strained during the pandemic as people and businesses stocked up.
  • Quote (Ryan Dezember, 04:39): “Retail problems are generally in the availability and the cost of the cylinders... there was a lot of pinch point in the canisters, the cylinders that are used to bottle the gas in small quantities.”

6. What Can Consumers Do?

• No Easy Fix:
  • Stocking up now could save money if prices rise further; many analysts predict continued increases.
  • The core issue: producers are holding back on drilling and supply due to investor pressure to prioritize profitability over output.
  • Propane is a byproduct of crude oil and natural gas production, which has also seen reduced drilling activity.
  • Quote (Ryan Dezember, 05:39): “Despite the recent rise in oil and natural gas prices, producers... are holding back on drilling... investors [want] profitability and not just volume.”

7. The Outlook for Prices

• Shortages Possible, Price Hikes Likely:
  • Domestic propane stocks are unusually low.
  • Wall Street expects prices may rise over the summer to a level that deters some exports, helping rebuild U.S. supply before winter.
  • Quote (Ryan Dezember, 06:32): “What will have to happen ... is that the price will keep moving higher this summer to a point that it discourages overseas buyers and prompts them to cancel some orders.”

---

Notable Quotes & Memorable Moments

• On Demand Stability:

  • “Demand really remains steady around the world while other types of petroleum demand decline.” — Ryan Dezember (02:03)

• On Unprecedented Prices:

  • “As far as we can tell, prices have... basically never been this high this time of year.” — Ryan Dezember (03:54)

• On Domestic Impact:

  • “A big cross section of households and businesses rely on propane.” — Ryan Dezember (03:38)

• On Supply Chain Strain:

  • “The retail problems are generally in the availability and the cost of the cylinders.” — Ryan Dezember (04:39)

---

Timestamps of Key Segments

• 00:57 — 02:59: Why propane prices are so high and global dynamics
• 03:04 — 03:50: Who uses propane and who’s affected
• 03:54 — 04:29: Historical context: Why summer prices are rare
• 04:39 — 05:26: Grill tank demand and supply chain hiccups
• 05:39 — 06:28: Strategies for consumers and future price predictions
• 06:32 — 06:57: Long-term outlook and potential relief

---

Tone & Language

The tone is informative and accessible, true to WSJ Your Money Briefing’s mission to explain personal finance topics in clear, practical language. Ryan Dezember provides straightforward analysis, free of jargon, with an emphasis on real-world impact for families and businesses alike.

---

Bottom Line

Propane prices are surging at an unusual time, driven by steady global demand, constrained supply, and changes in consumer and industrial behaviors since the pandemic. Households, farmers, and manufacturers all feel the pinch, with no quick fixes likely before winter. Consumers should be aware of potential further price increases and limited supply, while the market awaits a price adjustment that may ease export-driven shortages.

---

Transcript

[A]

Still running global payroll like a relay race. Deal replaces fragmented payroll vendors with one global system. No third parties hire, manage and pay teams in 150 plus countries with in house local experts and white glove delivery and deal plugs into what you already use. Workday SAP, Netsuite operate like a local everywhere. Visit d e l.com WSJ that's d e e l.com WSJ.

[B]

Here's your money briefing for Thursday, July 8th. I'm J.R. whalen 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 and is also burning through the cash in your pocket.

[C]

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.

[B]

So why are propane prices so high and is there any relief in sight? WSJ reporter Ryan December has been tracking the market. We'll ask him about it after the break.

[A]

Deal replaces fragmented Payroll vendors with one global system. No third parties, hire, manage and pay teams in 150 plus countries. Operate like a local everywhere. Visit deel.com WSJ.

[B]

We're in the midst of barbecue season, but this summer consumers are paying close to 20% more for propane and 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.

[C]

Thanks for having me.

[B]

So Ryan, why have propane prices risen so much this year?

[C]

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, you know, 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 US 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.

[B]

So who's affected by these higher prices? Why is the price increase so significant?

[C]

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 it's derivatives and plastics. Propane is also a major fuel used to power forklifts and things around ports and warehouses. So a big cross section of households and businesses rely on propane.

[B]

So we don't normally see prices this high for propane at this time of the year, right?

[C]

No, no. In fact, this is more akin to what we would see in, like, autumn and winter when prices, you know, when demand is much higher. In fact, the federal government doesn't even track prices this time of year because demand is pretty slow. People aren't, you know, heating homes and businesses and such. As far as we can tell, prices have. 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. But most of the demand comes in winter, and that's usually when we see prices this high.

[B]

Yeah, and, you know, we just had the July 4th holiday. A lot of people probably filled up their propane cylinders to light up the grill. Did that rush of activity have any effect on pushing up prices?

[C]

No, that's a lot of people buying, but in very small quantities relative to the big tanks that you would fill at your house for heat or what a chemical factory would buy. Now, retail problems are generally in the availability and the cost of the cylinders. We saw a lot of businesses that didn't have propane or didn't have tanks this year. And that's sort of a function of the pandemic, when a lot of people were stocking up, sort of hoarding stuff for their outside cooking, for their, you know, the patio heaters. A lot of restaurants added outdoor seating and tried to stay open as long as they could in the winter. So there was a lot of pinch point in the canisters, the cylinders that are used to bottle the gas and deliver it in small quantities.

[B]

Okay, so let's talk about how consumers can be smarter about dealing with these higher prices. Is there a way for them to plan out or strategize their propane purchases to, you know, kind of ease the pressure on their wallet?

[C]

You know, that's tricky. You know, people may want to fill up their propane tanks now if they think that, you know, prices are going to rise, which a lot of banks on Wall Street, a lot of analysts think will happen. And the reason is, is because despite the recent rise in oil and natural gas prices, producers around the world, and particularly in the US Are holding back on drilling. The they have been trained by their investors to be focused on profitability and not just volume. They were really stung last year by the collapse in oil prices and drillers have been really shy about drilling. And of course, propane is a byproduct of refining crude oil and also is a byproduct of natural gas drilling. And we've seen big reductions in the amount of activity and that's leaving supplies a little short while demand remains steady and in fact is booming around the world in the export market.

[B]

So any relief in the long term outlook for propane prices that you're aware of?

[C]

Well, analysts and banks on Wall street think that what will have to happen to ensure that there aren't price spikes this winter and shortages in certain areas is that the price will keep moving higher this summer to a point that it discourages overseas buyers and prompts them to cancel some orders. That would then leave enough propane in the domestic stocks, which are really low for this time of year, to sort of replenish and be, you know, have enough to go around this winter.

[B]

All right, that's WSJ reporter Ryan December. Ryan, thanks for coming on the show.

[C]

Thanks for having me.

[B]

And that's your Money briefing. I'm J.R. whalen for the Wall Street Journal.

[A]

Deal replaces fragmented payroll vendors with one Global system. No third parties. Hire, manage and pay teams in 150 plus countries. Operate like a local everywhere. Visit d e l.com WSJ.