Propane, Other Fuel Prices Feel the Burn as Oil Declines
Prices of Natural-Gas Liquids Have Been Hurt; 40% Declines Since September
By Timothy Puko
Dec. 21, 2014 6:35 p.m. ET
Sinking oil prices are taking propane, butane and other products used in the chemicals industry and home heating along with them.
The fuels, called natural-gas liquids, are a byproduct of oil and gas drilling and are used to heat homes, fire up grills and make plastics. So-called NGLs have been a source of profits for energy producers because their prices, until recently, stayed high even as natural-gas prices dropped.
But prices for NGLs—which include ethane, propane, butane, isobutane and natural gasoline—have turned sharply lower in recent months. From Sept. 1 to Dec. 15, the price of all the aforementioned NGLs except ethane dropped at least 40%, according to Oil Price Information Service. Ethane prices dropped 23%.
Prices for the fuels are closely linked to oil, so a sharp drop in crude prices has exerted downward pressure. A glut in the U.S. is also weighing on these markets. Propane and butane are at more than 10-year lows, down nearly half since the start of September.
The low cost of propane will help the roughly 5% of American households that use the NGL for heating to save anywhere from 20% to 34% this winter. Producers in the U.S. Northeast are likely to be among the biggest losers from the retreat. These companies had stepped up drilling in NGL-rich areas in Ohio and Pennsylvania, counting on the fuels to add several dollars to the value of every barrel of oil produced. But pipeline space to carry NGLs out of the region is limited, which is expected to worsen a regional glut.
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