Increased propane prices predicted for Ontario this winter as global demand affects domestic inventories. Courtesy Photo
WINCHESTER – For years, natural gas and propane have been the less expensive option for home and industry including various farming processes such as drying a harvest of corn, soybeans, or wheat.
The recent headlines that Canadian propane prices could increase by 300 per cent are alarming.
Up until now the price for propane for home and farm use was stable and predictable. Like so many other industry standards that may have just changed.
The gas and oil experts blame the Canadian exports of natural gas to China as being the cause for higher prices at home. News reports peg the increase in Edmonton as 297 per cent. That increase reflects a dollar price of $1.40 US a gallon from a humble .25 cents US per gallon.
Propane prices are sitting at a seven-year high and are waiting to see what winter will bring in terms of propane and natural supplies. As the gas takes over from oil as a heating fuel, the colder weather places more demand on the energy producing industry. Increased exports just add more pressure on domestic supplies.
Far away from China and the oil and gas centres of the world is Guy Fuels in Winchester, Ontario. Guy Fuels & Propane is a family-owned and operated business.
The local fuel company has had to survive challenges as it transitioned from a company providing fuel for oil furnaces to one that caters to a growing market for propane and natural gas driven furnaces.
Guy Fuels & Propane is operated by Chris Guy and Martine Thurler-Guy. They look after commercial and home propane services in the region.
While western Canada propane prices may be exploding, that is not what propane suppliers are experiencing in Ontario, at least not yet.
Chris said, “Unfortunately, all input costs are up.”
Since 5 per cent of the company’s customer base uses propane to dry their crops, price increases will have an effect on a farmer’s bottom line.
“We are actually seeing a bit of relief in increased prices in the past week and a half,” said Martine. “Inventories are increasing slightly; however they are still lower than they would be at this time in any other year.”
She said she was relatively optimistic about the markets, even though she admitted the markets can change anytime and any day without much notice.
“It depends on the weather, and the increase in massive exports to China and Europe.”
The profit margin for exported natural gas products appears to be better than domestic prices so producers put their energy into whenever the greatest profit will be.
“It is impacting our domestic price and depleting inventories to levels that haven’t been seen before,” said Martine.
According to Martine the cost of heating has gone up approximately 20 per cent.
“Unfortunately, the federal charge has not helped the end consumer, as it rises 33 per cent every year.”
“Normally we would see higher prices in January. This summer we were looking for an ease in the market in the cost of propane, and we never saw it. Normally we would book so much volume through the summer months for corn dryers and large commercial users and based on what is common in the marketplace regarding a drop in price in the summer, it just did not come.”
To try and provide a consistent pricing strategy Chris said, “We truly do our best to provide a product at fair and competitive prices. Contracting for large users is common and we offer fixed pricing for large volume users.”
He added that as the propane inventory increases the marketplace will respond with a decrease in price.
Covid has been a serious challenge for all business in Ontario.
Chris said, “We have faced significant challenges with COVID, how to protect our team, their families and our customers has been of utmost importance. We are an essential business, and we ran our business with two completely separate teams for a period of time to ensure uninterrupted service in case of a COVID outbreak. We eased credit terms, and saw our gas business plummet. Yet our burden seemed light compared to the many businesses that were forced to close their doors.”
Martine explained that the propane market served by Guy Fuels looks like a simple one but in fact it is very complex, and it is affected by global decisions and local weather.
“There are three things that we need to do well and that our customers depend on, secure supply, provide effortless fuel management solutions and be competitive,” said Martine.
Covid has impacted every supply chain used by society and a decrease in oil production has influenced propane inventory. Another factor is a labour shortage and getting what propane that is produced to market.
Propane is derived from natural gas processing and petroleum refining.