January 5, 2011
(Next Release on January 12, 2011)

Northeast Propane Update

While consumers across the Nation are experiencing higher petroleum product prices due in part to rising crude oil prices, propane consumers in the Northeast have seen regional supply issues add to overall price pressures. Residential propane in New England has risen to $3.28 per gallon, while Central Atlantic prices, at $3.37 per gallon, are the highest in the Northeast. Prices in the region have risen over 45 cents per gallon since the start of this heating season, compared with a 29-cent increase in Midwest prices (where the residential propane heating market is much larger). Prices in New York State, where the supply disruption is centered, have grown by 56 cents over the heating season.

As reported in the November 10 edition of This Week In Petroleum, propane supply into New York State and the Central Atlantic and New England regions was disrupted earlier in the season due to an outage on the Enterprise TE Products Pipeline (TEPPCO) that brings propane into the Northeast through New York State. The pipeline failure occurred downstream of the Watkins Glen, NY terminal, which was able to remain operational, but pipeline flows to the Harford Mills, Oneonta, and Selkirk, NY terminals were curtailed. Rail and truck shipments from outside the region, as well as waterborne imports into Providence, RI and Newington, NH, have thus far sustained propane stocks in the Northeast while portions of the pipeline remain out of service. In fact, propane stocks in New England fell to just 39,000 barrels in mid-October, prompting companies to utilize truck and rail shipments from outside the region much earlier than typical to rebuild supply. The ongoing supply chain issues warrant monitoring, as there is potential for supply difficulties as we move deeper into the winter.

Cold weather in the Northeast during December translated into 5 consecutive stock draws in the Central Atlantic, while New England stocks fluctuated during the month. New England propane inventories were 0.7 million barrels on December 31, 72 percent above the 5-year average, while Central Atlantic inventories, at 1.6 million barrels, were 20 percent below the 5-year average (Figure 1). Central Atlantic stocks are almost 34 percent higher than levels seen two years ago when inventories in that region stood at historically low levels.

Currently, product transportation issues in the region are more pressing than relative stock levels. Enterprise has successfully completed hydrostatic testing of the portion of the pipeline between Watkins Glen, NY and Marathon, NY and received regulatory approval to resume operation from the Pipeline and Hazardous Materials Safety Administration (PHMSA). Enterprise expects that pipeline flow of propane to the Harford Mills, NY terminal should resume on January 5. While loadings at this terminal had already resumed after Enterprise trucked product in from other areas, Harford Mills has capacity to load only 2-3 trucks per hour, leading to long wait times for truck drivers. Since Federal and State regulations limit the number of hours drivers may be on duty, including time spent in loading terminal queues, propane dealers in some States have sought driver hours-of-service waivers to help ease distribution.

Enterprise is continuing its hydrostatic testing of the pipeline east of Marathon. The company currently estimates, pending regulatory approval, that pipeline service to the Oneonta, NY terminal will recommence during the week of January 3, while service to the Selkirk, NY terminal may resume the week of January 10. However, these dates may change if further delays occur.

Retail Gasoline and Diesel Prices Increase for the Fifth Straight Week
The U.S. average retail price for a gallon of gasoline increased for the fifth straight week, advancing almost two cents versus last week to $3.07 per gallon, $0.41 per gallon higher than last year at this time. Prices on the Gulf Coast jumped two and a half cents, the largest increase in the country, followed by the Rocky Mountain region, where prices were over two cents higher. The East Coast, West Coast, and Midwest all saw gasoline prices rise under two cents, in line with the national average increase. Prices on the West Coast were the highest in the country at $3.24 per gallon, while prices in the Rocky Mountains were the lowest at $2.85 per gallon.

Diesel prices also advanced for five consecutive weeks, with the average retail diesel price increasing almost four cents per gallon. The national average for a gallon of diesel is now $3.33 per gallon, $0.53 higher than last year at this time. As with gasoline, prices on the Gulf Coast led the way, gaining a nickel versus last week. East Coast prices were up more than four cents. Diesel was more than three cents higher on the West Coast. Rounding out the gains for the week, both the Midwest and Rocky Mountains increased about two cents. This marks the thirteenth increase in the last fourteen weeks for the Rocky Mountains.

Residential Heating Fuel Prices Rise
Residential heating oil prices continued to rise during the period ending January 3, 2011. The average residential heating oil price increased by approximately $0.03 per gallon last week to reach $3.34 per gallon, an increase of $0.46 per gallon from the same time last year. Wholesale heating oil prices increased by nearly $0.01 per gallon last week, reaching a price just shy of $2.65 per gallon. This is $0.42 per gallon higher than last year’s price.

The average residential propane price increased by $0.03 per gallon to reach $2.74 per gallon. This was an increase of almost $0.21 per gallon compared to the $2.53 per gallon average from the same period last year. Wholesale propane prices remained just shy of $1.42 per gallon. This was a decrease of $0.05 per gallon compared to the January 4, 2010 price of $1.47 per gallon.

Propane Stocks Continue Seasonal Descent
U.S. inventories of propane continued to drop over the past week as winter weather swept across the country. Total propane stocks dropped 2.7 million barrels to end at 52.6 million barrels. The Midwest region drew 1.7 million barrels of propane inventory, while the Gulf Coast region drew 0.5 million barrels. The East Coast regional stocks also fell, by 0.4 million barrels, and the Rocky Mountain/West Coast region dropped 0.1 million barrels. Propylene non-fuel use inventories represented 4.1 percent of total propane inventories.

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