The Oil Boom Doesn't Care if Your Chickens Are Freezing to Death

Propane is a byproduct of both natural gas production and crude oil refining. Just in the past year, its production has spiked by 15 percent, and a good chunk of that new production is considered surplus, to be exported from brand new fuel terminals. In fact, just since 2012, propane exports have gone up from around 150,000 barrels to 400,000 barrels a day as of last October. It should be flush times the Hank Hills of rural America. But, according to The New York Times, it's quite the opposite. Propane fuel prices have shot up in some areas by more than $2 a gallon since the beginning of winter, and as of the end of January, the national wholesale average for propane had more than doubled in less than a month's time.

If you're of suburban or urban origin, propane might recall BBQ grills more than the thing that keeps your house warm. But its use for heating is widespread in rural areas, often going for less money per-gallon than heating oil while burning cleaner. (Figure about 8 percent of Midwestern homes use propane as heating fuel.) Lately, it's been a lot cheaper than oil. In December, a gallon of heating oil went for for over four bucks, while propane chilled at $1.70. (The fuels deliver different BTUs, but even with the conversion, propane was about $1.50 cheaper.) Since then, the situation has reversed itself, with dire consequences and muddy explanations.

For example, in North and South Dakota (notably where much of the gas boom is concentrated), the Standing Rock Sioux Tribe has been forced to open shelters for its members to stay warm while their tanks at home sit empty. Meanwhile, state attorneys general from across the Midwest are claiming price-gouging and opening top serious investigations, while local and state authorities race to provide emergency assistance to squeezed households. Unfortunately, that assistance isn't in the form of tankers full of propane.

Shortages are the root problem, with big fuel suppliers cutting off local providers with thanks to this year's deep freeze—and corn. Last fall was wet, which meant harvesting wet corn. So, some larger percent of February's missing propane went to drying out some corn in November. The thing is that the propane emergency was already manifesting last fall in this very different form, when prices were still very low. Wet weather during the harvest season meant a need to dry harvested corn, which is done with help from propane fuel (corn needs to be dried to 15 percent moisture to be stored without molding). This put a hurt on local propane stocks. The "propane drying crisis of 2013" (in the words of AgWeek's Mikkel Pates) ended without disaster, but winter was still coming and, along with it, something much worse.

Propane, like its combustible relatives gasoline and diesel, isn't typically stored in large quantities locally. It's piped and shipped around as needed, but that's not quite as smooth an operation as, say, an electrical grid, which has vastly more ability to bounce supplies around the country as demand varies. In fact, part of the propane problem is due to the early-winter shutdown of a pipeline from Alberta to the upper-Midwest as part of a larger project by gas energy giant Kinder-Morgan to reverse that pipeline's flow, a task expected to take until this summer.

At the end of last month, energy company ONEOK filed the regulatory paperwork to reverse one of its own pipelines to move propane back from Oklahoma to its storage hub in Kansas. Basically, this nod to the current crisis just means it might at some point this month provide some relief in the form of increased supply. But only if it feels like it, that is.

As for the chickens, here it is from the NYT:

Hundreds of miles to the southeast, at the Del-Ray Ranch here in Calhoun County, Ala., the concerns were just as intense in the state’s $15 billion a year chicken business. Ray Bean began his week with the realization that the propane supply that helps him and his wife to raise more than 500,000 chickens a year had dwindled to zero.

“You know that within four or five hours, if that temperature starts to fall, those birds are going to pile up against the walls to try to maintain body heat,” said Mr. Bean, whose farm quickly received an emergency delivery, but only for 20 percent of normal capacity. “You know what’s going to happen.”

So, to recap, American corn producers operating with help from government farm subsidies were buying propane with, in some part, your money to dry out their corn harvest. For reasons that remain somewhat a mystery, the American propane infrastructure, which is about as resilient as a dog fart, apparently, didn't recover or refill in time for our current full-on epic winter. And, to mess things up even more, only a month before the corn harvest propane crisis, producers were racing like hell to get propane out of the domestic market with help from brand new export terminals.

There's your oil boom: paying for others' profits while your chickens die horribly and people you didn't vote for figure out the economics of offering relief during a heating fuel crisis. Good times.