US propane shortage hits millions during brutal freeze

NEW YORK (REUTERS) - Millions of Americans are feeling the pinch of a propane shortage this week as brutal cold exposes the supply vulnerabilities of a fuel that heats homes, schools and businesses across wide swathes of the United States.

Prices of the fuel, a liquefied petroleum gas, have rocketed to all-time highs in Midwestern states, distributors are rationing supplies, and some schools have shut due to a lack of the fuel during this year's second bout of Arctic weather.

On Friday, propane heading for the Midwest changed hands at US$4.30 (S$5.50) a gallon - more than double its price just last Friday - although it had traded even higher at close to US$5 a gallon the previous day.

The National Propane Gas Association said on Thursday the states of Wisconsin, Minnesota and Missouri were worst hit and that it has heard that some retailers have run out of supplies. "But we have not heard of homeowners running out of propane.

Those companies that have run out tell their customers to call their competitors," said Jeff Petrash, vice president and general counsel at the NPGA.

But as a record-breaking freeze coincides with pipeline outages and low inventories, the crisis has spread further.

Most households are not connected directly to propane pipelines, and the system relies heavily on truck fleets now running at full capacity to get emergency supplies to states across the Midwest, Northeast and Southeast.

The US Department of Transportation has issued emergency orders suspending the limits on the amount of time truck drivers can spend on the road for 10 Midwestern states and 12 Northeastern states, a rare regional order.

A spokesman for Pennsylvania-based AmeriGas, the largest US propane retailer, said it was rationing deliveries to "small pockets" of Alabama, Georgia and Tennessee on Thursday, reducing supplies to 100 gallons per customer from the standard delivery of some 250 gallons.

"Supply is very tight. There is propane to be had out there, but there are supply and transport issues across the country,"spokesman Simon Bowman said.

US propane production has grown in recent years thanks to the shale oil and gas boom, but the resulting higher supplies have caused domestic prices to sink below global levels. That in turn, has encouraged exports of the fuel from the US Gulf Coast to Japan and Latin America, where prices are higher.