IHS Market Warns Of “Armageddon” For US Propane Market
The expanding energy crisis is causing propane to rocket higher (read: here) as supplies dwindle to below seasonal levels as research firm IHS Markit Ltd. warns of “armageddon” during the Northern Hemisphere winter.
IHS analyst Edgar Ang told attendees during a virtual presentation on Tuesday that US propane inventories are at a record low and will be extremely tight as cold weather is ahead. Mean temperatures in the Lower US 48 are expected to dip into the 60-55F range through the end of this month.
Heating degree days are set to soar by month end, suggesting the heating season has already begun.
Ang said 1Q22 prices are already above later-dated supplies that “it may indicate players are preparing for propane-market armageddon.” He warned some areas of the country might be prone to shortages this winter.
Propane prices, which are used for heating resident and commercial building structures and also used for industrial production of plastics, have jumped to the highest in a decade due to increasing overseas demand and tight production. The surge comes as a global energy crunch threatens to derail the global economy.
In a separate report, the Energy Information Administration (EIA) expects households that use propane and heating oil this year will spend much more than last. This could strip out some of their spendings in other areas of the economy, such as eating out.
Soaring energy prices, plus food, shelter, and other costs, will continue to pressure the Biden administration to solve persistent inflation that eats away at real wages.
Making matters worse IHS expects a cooler winter that could boost energy demand and continue to place a bid under propane prices, analyst Veeral Mehta said.
It’s only now that the Biden administration wishes there was global warming.
