Propane users also burned by high bills

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Propane users also burned by high bills By Jennifer K. Morita Bee Staff Writer (Published Jan. 20, 2001)

California's propane users, all but forgotten in the recent energy crisis, are also being stung by soaring costs this winter. Rural residents who need propane to cook food, take hot showers and heat their homes face bills that have doubled in the last few months because of the high cost of natural gas.

"We've had extraordinary circumstances this year," said Daniel Myers, executive vice president and general manager of the National Propane Gas Association.

Since propane is a byproduct of natural gas and crude oil, when the cost of crude oil peaked at $35 a barrel last August, propane prices increased to 50 cents a gallon at a time when they are usually down to 35 cents, Myers said.

Then, in the fall, natural gas prices began rising to four times their normal amount.

"It had the effect of not only continuing the high prices of propane, but dragging it even higher," Myers said. "On top of that, November and December were the coldest November and Decembers on record (in the United States) in 106 years, so consumers got a triple whammy."

Californians were hit especially hard because much of the propane they use comes from refineries.

"Refineries typically use natural gas in their boilers, but with natural gas prices so high they found it was much cheaper to consume the propane they normally produce and sell into the market," Myers said. "Consequently, as much as 50 percent of the product they normally sell to retailers was being burned up in the boilers of refineries."

The wholesale cost of propane has risen from 60 cents a gallon in September to $1.30, said Ryan Hooker, who works for FerrellGas, one of the nation's largest propane providers.

Rick and Janet Nicholson rely on propane to not only cook food and keep their Auburn home warm, but their livelihood also depends on FerrellGas deliveries they receive every three weeks.

The Nicholsons, glass blowers who have worked out of a home studio for 20 years, use a propane-fueled furnace to melt glass for their artwork.

"The furnace is on 24 hours a day so we can have raw material ready to work with in the morning," Rick Nicholson said. "We can turn it down a bit at night, but not too far because then we'll have to crank it really hard in the morning."

Although the Nicholsons' mon-thly bill usually increases during the winter, they say it's more than doubled from $506 in May to their latest bill of $1,382.

"We had a spike a few years ago, but I've never seen it get this out of whack," Rick Nicholson said. "If it stays this way, it's going to cost me more than $10,000 a year, and that would be a big bite to swallow."

But Hooker, a FerrellGas district manager in Grass Valley, said retailers have little control over gas prices.

"When the wholesale cost goes up, we certainly need to pass that on," Hooker said. "We're certainly not taking advantage of the customer. Our (profit) margins have actually depleted in an effort to keep the cost down."

Roughly 15 million U.S. households depend on propane, and roughly half the farms in the country use it for their operations.

Myers, who has been in the propane business for 23 years, said the cost has spiked a few times during brief periods of frigid weather.

"But then the price drops back," Myers said. "As for sustained high prices that we've experienced this year, I cannot recall a time when we've seen anything like this. It's pretty much unprecedented."

http://www.sacbee.com/news/news/local03_20010120.html

-- Martin Thompson (mthom1927@aol.com), January 20, 2001


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