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Natural gas prices rise, propane prices are steady

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July 6th, 2016 by Ric Hanson

While we’re in the midst of a summer heat wave, some Iowans are already thinking about the winter ahead and the price of heating our homes. Iowa Department of Agriculture fuels analyst, Harold Hommes, says the cost of the most popular fuel used to heat homes in Iowa has jumped up by around one dollar in the last few months. Hommes says the move up in price of natural gas is easier to take after the cost bottomed out.

He says the cost reached “incredibly low” values earlier this year of one-dollar, 60 cents to one dollar, 70 cents per million-metric therms earlier this years. Hommes says there’s still good supplies available and with the price hanging around two-dollars, 86 cents, it’s still a “real, real good value.” You can still benefit from lower natural gas prices in the summer season, as it’s used for a lot of products.

“Business and industry continue to use it, it’s fractunated and ends up in a lot of industrial products that we use,” Hommes says. He says natural gas is used to make nitrogen fertilizer for example, and in a lot of other industrial uses. Hommes says if natural gas prices continue to move up, that doesn’t necessarily mean you’ll see an increase in price from the utilities when it’s time to turn on the furnace.

“My guess is that in anticipation for fall demand pick up they’ve already locked in prices at some pretty preferential rates. So , I look for this winter’s prices to be fairly competitive,” according to Hommes. The cost of another heating fuel — propane — is likely remain steady heading into fall.

“One month ago, we were on 98-cents a gallon and we’re still there today, virtually unchanged,” Hommes says. “Even in comparison to last year, at this time a year ago we were at one-one-oh-one ($1.01) so, again, we’re pretty much unchanged if not modestly three cents lower.” Given the market impacts of supply and demand, he says our supply is exceptionally high and the demand is very low during the summer months.

Hommes says, “Right now, we’re sitting here in the Midwest on record inventory levels that exceeded what would’ve been a record last year but we’ve surpassed those.” A few things could change the picture, he says, like a long-range forecast that calls for a bitter cold winter, or if there’s an increased demand for propane by farmers this fall to dry their crops. Still, he predicts there will be -no- significant propane price spikes in the coming months.

“If it does go up during the heating season, I would expect only modest increases,” Hommes says. “It’s going to be one of those years where last year, people got by without locking in the pretty favorable summer prices and we never really saw a great appreciation throughout the winter season.” He predicts a repeat in the winter ahead. In January of 2014, Iowa hit a record high for propane at just over five dollars a gallon, while prices now are about one-fifth that. It’s estimated 67 percent of Iowans use natural gas to heat their homes, 15 percent use electricity, 14 percent use liquid propane.

(Radio Iowa)