Thursday, February 6, 2014

Wisconsin’s Propane Shortage

Written by: Theo Dubiel

During this winter, many houses in Wisconsin were left in the cold, as heating bills escalated and temperatures outside plummeted. Propane, the gas responsible for heating approximately 250,000 homes in the Wisconsin region, is in such a short supply that Scott Walker has declared a state of emergency. Regardless though on how scarce this commodity gets, demand for the home heating gas is still in demand,
causing prices to sky rocket. Since January 13, Prices for propane have almost tripled in some areas, from $1.87 per gallon up to $4.86. This step up in price is causing further problems for families and small businesses that now either need to lower their thermostats or pay the heavily raised price for heat.




The severe drop in the supply of propane has been attributed to several sources. Besides heating houses, propane is also used in industrial grain dryers and livestock facilities for heat. Beyond that, some of the loss in propane can be attributed to the fact that a pipeline was downed from the end of November and not repaired until the middle of December. In addition, due to propane’s previous abundance in the area, exportation of the product to other countries and areas has further put a strain on the local supply. All these factors combined have now resulted in the shortage which the mid-west must handle during these cold winter months. The small supply that still lingers in the area is still being moved from house to house, but is now being rationed out by dealers. Some dealers are even limiting their deliveries to 100 gallons per customer in an attempt to service more people. Unfortunately, a family can easily burn through 100 gallons of propane within a couple weeks in some circumstances, depending mainly on how warm they keep their house and how good their insulation is. Furthermore, many people who pre-purchased gas are not receiving their guaranteed amounts of propane from their chosen supplier.

These individuals now have to pay for premium gas elsewhere, while still having money tied up at their original dealer. Contracts are also being put on the back burner for some clients. For example one small business’s contract for propane is no longer being honored. Originally the deal was set at $1.19 a gallon, but now the supplier wants $5.29, which the business owner will refuse to pay at such a high price.



Government intervention is already taking place in several different forms. State Officials are currently looking into propane companies to ensure contracts are being honored, while funds such as the Keep Wisconsin Warm/Cool Fund are expanding their reach to ensure no one is left in the cold. Recently governors of several states have also signed letters to the White house, urging the president to increase current supplies, and to create more stable supply lines for the future. Even with the current relief efforts though, the revival of the propane supply will be a somewhat slow process, and with winter showing no signs of stopping, one begins to question if it will be enough to keep homes across the Midwest warm.

Work Cited
http://www.jsonline.com/business/propane-dealer-in-northeastern-wisconsin-stopsmaking-
deliveries-on-prepaid-contracts-b99195976z1-242968381.html

http://news.nationalgeographic.com/news/energy/2014/01/140129-us-propaneshortages-
leave-homeowners-in-the-cold/

http://whbl.com/news/articles/2014/feb/04/gov-scott-walker-signs-letter-to-presidentobama-
looking-for-propane-shortage-help/

http://www.youtube.com/watch?v=z6YECnMwnKc

Images:
http://media.jrn.com/images/185*484/PROPANE01G.jpg
http://images.nationalgeographic.com/wpf/media-live/photos/000/759/cache/wisconsinheating-
propane-winter_75976_990x742.jpg

30 comments:

  1. I remember one of the teacher's mentioning that her family was effected by the shortage of propane gas. Not only is this going to effect people, but if farmer's can not keep their livestock warm enough, who knows what kind of inflation we will have in prices of meat and other foods when summer comes around.

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  2. This is a perfect current example of supply and demand. With how limited the supply is, the prices will sky rocket, making consumers very upset. In the end, most people are willing to pay the price because it is a need for them on the cold Wisconsin winter days. Many have forgotten what the warm summer days feel like due to extremely low temperatures and now to think it is difficult for some to keep their homes warm and comfortable is very sad. People deserve to come home into their warm heated homes especially for a lower price than the current rate of propane.

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  3. This is extremely interesting. Has this happened in the past with our previous cold winters or is it only happening now due to our extremely cold winter the past few months. It is very unfair for those who already have contracts and the companies are not following through with them costing the consumer even more than they should by purchasing somewhere else in addition.

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  4. This post shows almost directly how the demand of a product will not affect the production possibilities curve because the resources of this propane are staying constant. Since even a growth in the economy may would not affect production because propane is not something that can be produced but rather is a necessary element to heating our houses. As for the issue of price, companies are increasing the price to bring in more money, yet some people are not willing to pay that much and some are not even able to pay that much, so the problem of heating is not solved.

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  5. I didn't know we were in such short supply of propane at the moment-- although it makes sense, given the current weather conditions. I'm interested to see how this shortage affects overall prices, not only for propane, but for other products, too. Hopefully winter ends (or at least warms up) soon, because I don't want to see what happens when our propane supply runs dry.

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  6. I would be extremely upset if my business was under contract with a propane dealer and they wouldn't sell me propane because the are asking for four more dollars a gallon that what we agreed on. I understand times are tough but the business world is tough and it is a shark eat shark world. I heard that an air line some time ago had a contract with a gas company to pay 3 dollars a gallon for gas back when it was two something and now they are continuing to get it for 3 dollars a gallon when it is more than that. That is what I should feel should happen in this situation, I mean if it is under contract what can the purveyor do?

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  7. Having a shortage of propane is a major issue than most people think because we use it for a variety of things. Also, we have too short of a supply to be exporting our propane when we already have a shortage in the U.S. The price has tripled and that is not a good thing for homeowners who have to heat their house. Having high prices of propane is going to cost businesses and homeowners too much money and eventually it’s going to be in high demand and at too high of a price for anyone to afford. There has to be a larger production otherwise it’s not going to be affordable.

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  8. I thought that your post really showed how supply and demand can be greatly affected when things like this happen. I think you should have gone into a little more depth of how much money the companies are making now rather than when the price was lower, due to the fact that they are getting more money because of rasing the price for the high demand. Other than that I thought you really went into depth with relating multiple parts of the issue, like the govenor talking about how we are in a state emergency and even going to the government about future supplies and hitting on how it is not only houses that are struggling to get the heat but other places like large facicilites for farm animals. You really had well rounded topic that showed the deperate need that many of Wisconsin residents are in.

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    Replies
    1. Samm, remember, I'm not asking you to evaluate the post, but to contribute something new to the debate.

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  9. This post was really successful at developing an informal and conversational style. The author portrayed his knowledge of the situation and taught me something I did not know. They used many reliable sources, and linked their information to current media topics/issues. I never thought of a lack of propane as a problem until I read this post. I learned something new, and was able to understand the situation. It relates to what we are learning now because it’s all about supply and demand. The supply of propane during the winter is becoming less than the demand which creates the perfect issue to write about. This was an all around great blog post.

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    Replies
    1. Peter, remember, I'm not asking you to evaluate the post, but contribute something new to the debate based around economics.

      Delete
  10. The propane shortage relates really well to supply and demand and the mixed economy of the United States. One of my family's friends owns a farm and has felt the impact of the propane shortage firsthand because she uses propane to heat her farm and keep the animals warm, so she has had to make other cutbacks in her budget due to the increase in cost of the propane. The idea of a mixed economy also is related because although private companies run the propane market, Governor Walker asked President Obama to help with the propane crisis, showing how the government participates in the mixed economy.

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  11. The Keep Wisconsin Warm Act funds are expanding so they can help keep families in crisis warm, which is phenomenal. The average family spends around 50-60% of their monthly income towards energy cost, but not all families can afford that.Because of the economic instability and increasing layoffs, it's easy for the most vulnerable in our community to fall between the cracks, leaving them alone to face life threatening emergencies. Heat, known as a basic necessity, has become an unaffordable luxury for thousands of families with no where left to turn. Most of the people helped by the Keep Wisconsin Warm Act are elderly, disabled, and families with small children. Thank the government for that act.

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  12. The graph you chose is very fitting and helps illustrate the sudden increase in prices. You also did a good job explaining how supply and demand can easily effect the average consumer. Personally, I don't know anyone who is struggling because of the propane shortage, but it is obviously an issue that needs to be resolved, as it is critical to farm production. It would be nice if you could elaborate a little more on what exactly happened with the broken pipe--what other economic consequences did it result in?

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  13. This is a great example of what we just learned about in class about supply and demand and what happens when resources are scarce. As we talked in class, the more scarce the resource, the more expensive it becomes, especially if it is in high demand. With the winter we are having, keeping your home warm is a very important thing, and for those who need to heat their house with propane, it has become an expensive thing. Now we just need a solution to get propane back to being a resource that is not as scarce, making it affordable to consumers. Also, I think you did a great job incorporating all the different ties of what we learned in class in your post, and you can definitely hear your voice come through your post. Nice Job!

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  14. You did a fantastic job on explaining supply and demand. It is interesting to see how the prices of propane sky rocketed almost instantly. I haven't heard anybody absolutely needing propane for heat, but if it is needed for farms to produce food then this is a problem. Besides the governors writing letters to the White House for more supplies and resources, what other plans of action is Wisconsin going to take to fix this problem?

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  15. This topic was the perfect example of how supply and demand effects the cost of products in our society. When there are limited supplies, economists, store owners, and consumers alike are forced to determine whether or not the benefits outweigh the rising costs. This issue is very close to home showing just how much economics effect our day to day lives. Now that government intervention has begun, it will be interesting to see what steps will be taken to try and resolve the issue. As you said, many households are forced to make a tough decision - whether or not to turn back their thermostats, or to pay three extra dollars for a can of propane to heat their homes. The issue itself is fairly controversial because heat is not a luxury item one can decide to overlook, it is a basic need, especially with the subzero temperatures we have been facing this winter.

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  16. I like that you chose a pressing issue. I struggle with the cold, and I have a heated home. I can't imagine how others must be feeling living in homes they can't afford to heat. I heard that last year we averaged 15 inches of snow. This year, there is already an average of 45 inches. With winters as gruesome as this year's, heat is essential. I like how you included the actions being taken to ensure the safety of those unable to afford the hefty price of heating their houses. Maybe the government should also look into finding innovative ways of insulation. Because the gas needed for heat is limited, if we found a cheap, more effective form of insulation, more families could afford warmer homes. Perhaps, the real solution can be found in the investment of the creations of our engineers.

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  17. It is clear that the shortage of propane has shown itself to be an issue during this cold winter in Wisconsin. Prior to your points I was not aware of the countless uses of propane and the excessive amounts in which families consume and burn it off. Clearly, as we discussed in class, the limited amount of this important resource calls for an increase in demand. This demand is fluctuating reasonable pricing for the profit will potentially have the ability to increase more resources. But how is the White House going to increase the supply shortage? How important is this Wisconsin problem to the President and all of his needs? In my opinion the Keep Wisconsin Warm Act is an extremely important motion to focus our people on the importance of warmth in our homes and they should continue to do everything in their power to explore possible solutions.

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  18. It's really amazing how just a couple of weeks of this cold weather can increase the price for propane. This really is a good example of how supply and demand can impact everyone from a small city like Pewaukee to a national level. This is definitely something that I hope our governments can help with to make sure that everyone is given the chance to get propane, and I hope the Keep Wisconsin Warm Act will succeed too. Do you know if they've looked into other ways to get propane to people besides just the pipes in Wisconsin to make up for our loss?

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  19. I really liked how your post is a direct example of 'supply and demand' with the rising prices of propane and devastating shortage. Since there is a limited amount of propane, the prices will skyrocket (just like our textbook example in class). I also really liked how you mentioned that it is not only used for heating homes but for farm production as well. The only thing that I think could have added to your post would be explaining how exactly the shortage happened; not just explaining that the pipes needed to be fixed. It's hard to put yourself in the shoes of someone that this is really effecting but after reading your post people will be more aware of what exactly is going on.

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  20. I think this article was very interesting because it shows how the this was a mixed economy problem because it effected the public in many ways. One of my family members was effected by this they live up north and they had an increase in their heating bill due to the deficiency in propane. When governor Scott Walker asked for Obamas help to help talk to companies to have companies help give more propane from other countries it shows that the government looks at the opportunity cost and helps when needed

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  21. Although my house is slightly older, it isn't heated by propane, but I can fully understand the crisis of this situation. A portion of my house is newly constructed, but the insulation is terrible so our heat bill is constantly sky rocketing. In order to keep that side of the house bearable, the thermostat needs to be cranked. I can only imagine the distress that families over feeling over their propane bills or lack of because of the propane shortage. It's a scary situation, considering that there are families who may be struggling to keep their homes warm. Luckily, as Kaylah stated, there are actions being taken to assist those in need. I think we all know how cold Wisconsin can get, so fortunately the Keep Wisconsin Warm Act is taking efforts to reach out to those who are experiencing this shortage and don't know where to turn. Hopefully Scott Walker and President Obama will be making efforts to create a more stable supply line for the future.

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  22. It is interesting how only in such a short time span, the scarcity of this product managed to catch up with us. before Early January the temperatures were fine, but throughout the month it just got colder and colder. I knew there was a problem because my parents saw the price increase, but I didn't realize how much a problem it became to the point of a state of emergency for the product itself.

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  23. This occurrence is a prime example on the strain of scarcity in extreme circumstance. It is a wonder how much further the prices will rise before the end of the winter due to the limited supply, especially since the temperatures have yet to rise. By the end of the winter propane could be as much as $7.00 per gallon it seems, by then how will families and small businesses survive? Hopefully this can be avoided in the future with a more stable supply.

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  24. This is a great connection to what we have been learning about in class so far. I don't know anyone who is in dyer need, but obviously it is an issue if Wisconsin is in a state of emergency because of it. My house is always decently heated so I don't have to worry about staying warm. Other people aren't so lucky.

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  25. This couldn't be more relevant considering the weather we've been having lately. I think that people don't think about the importance of having a heated home in the winter simply because it is a given to so many of us. This was a good eye opener to a lot of people who have never thought about a propane bill or what it takes to heat a living space. This is something we all will have to get acquainted with once we are older so this is a very useful read.

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  26. This is an awesome topic Theo! I haven't heard anything about this but it is definitely a pressing topic. It seems like the best use of the government's money would be put into green energy research and working to find a more efficient solution to the problem quickly. We have discussed green energy alot in my Model UN class. I believe too much money is being put towards sustaining the use of oil and other gases when that money should be going towards a quick development of an alternative source. Though it is not a complete tragedy yet, it is our generation that will have to address it. I don't know many statistics but I think it is a safe guess to say that the dwindling supply of propane will reach an all time low in our life time. Great topic!

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  27. This is an unfortunate turn of events for all who heat their homes with propane, to say the least. Though it is somewhat understandable that prices to non-contracted consumers should rise, I think it is unacceptable that the companies refuse to honor a contract without paying the fee they themselves would enforce on their customer if said customer violated contractual agreements. Additionally, in circumstances like this, the government would do well to monitor profit margins of these astronomical "emergency prices" to ensure that the companies are not simply charging as much as possible because of the immediate need and short supply. Prices should be allowed to vary, but profit margins should not, in order to keep heating, an essential piece of modern life, as affordable as possible.

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  28. This is certainly an important issue that countries in the Midwest and specifically Wisconsin have to deal with. I agree with you that the government should step in to make sure contracts are being honored and the government should even supply federal aid. This is a situation that cannot be controlled by the buyer or the seller and is just a natural phenomenon. a possible idea to limit propane use could be having a certain price for household up to a certain amount and then raising the price for additional usage. This would allow families who are willing to pay the extra get the luxury, and it would be just that, a luxury.

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