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Propane suppliers feel heat over shortages

Propane suppliers feel heat over shortagesA man dresses warmly as he skates along the Rideau Canal in -25C temperatures, Tuesday January 21, 2014 in Ottawa. The continued cold weather in Central Canada and the eastern United States has caused a spike in demand. THE CANADIAN PRESS/Adrian Wyld

OTTAWA - A shortage of propane in parts of Central Canada has suppliers scrambling to find extra fuel and rural consumers fuming about skyrocketing prices.

The Canadian Propane Association insists there is no supply shortage in Canada.

But the latest statistics from the National Energy Board show propane inventories were nearly 30 per cent lower across the country in January compared with the same month last year.

And one of the country's biggest suppliers, Superior Propane, predicted Thursday that prices will likely remain high until May.

"Traditionally prices have softened in the spring when winter heating demand eases," the company said in a statement. "Superior currently expects prices to ease at the end of April or early May."

The company also said the supply crunch may force it to ration deliveries in some cases.

"In order to ensure customers who use our product for heat or essential services, like hospitals, Superior may prioritize deliveries in order to meet these essential requirements."

Propane is commonly used to heat homes in areas that cannot be reached by natural gas lines. It's also used to fuel specially equipped vehicles and for industrial applications including the drying of corn and other crops.

Terry Arthurs, 69, owns Arthurs Fuels, a relatively small home heating fuel operation near Orangeville, Ont., and his trucks have been hauling propane seven days a week since October.

Arthurs hasn't run out of propane, but only because he recently installed two giant new storage tanks and has been calling in favours from suppliers — and competitors.

His operation currently has 200,000 litres of propane storage capacity, but goes through 60,000 litres per day.

"I've been in business here 50 years last month, and I've never seen anything like it," said Arthurs, who estimates he has sold $1.8 million more worth of heating fuel this year compared to last winter.

"One of our suppliers asked us to cut back (on deliveries), that they're short of propane and short of trucks."

Arthurs is also worried that a recent dramatic jump in propane prices could leave many of his customers out in the cold.

In December 2012, propane was selling in Ontario for about 62 cents per litre. By October last year it was at 70 cents. This week, however, the price jumped to $1.10.

The cost of furnace oil has also spiked, up to around $1.23 per litre this week compared with $1.01 in early October.

"I don't know how our customers are going to pay," said Arthurs, who regularly receives dozens of calls from clients angered by rising fuel prices.

The continued cold weather in Central Canada and the eastern United States has caused a spike in demand. And at least one industry watcher warns that, if the deep freeze continues, supplies could run nearly dry and cause another spike in prices by the end of February.

"The supply crunch is imminent," said former Liberal MP Dan McTeague, who runs a website that monitors fuel prices.

That's an alarmist viewpoint, the Canadian Propane Association suggests.

Earlier this month the association blamed transportation issues for the shortage and said it expected the ongoing supply disruptions to be "short-term." That remains the case, spokeswoman Allison Mallette said Wednesday.

"It's weather (and) transportation. That's why this (shortage) is happening."

But Jean-Marc Levac, owner of Levac Propane of St-Isidore, Ont., said he believes McTeague's predictions could come true.

"It is going to get worse, the way it's looking right now," Levac said Thursday after a frustrating day of fielding calls from angry customers.

One year ago, underground propane inventories in Canada were estimated at 1.07 million cubic metres, according to the National Energy Board.

Earlier this month, the board estimated inventories of 756,200 cubic metres, a year-over-year decline of 314,800 cubic metres.

The cold weather is partly to blame for the increased demand.

But inventories were also diminished by a fall sell-off to corn producers in the United States after the NEB predicted average season demand for heating fuels.

The assessment was based on forecasts from Environment Canada and the U.S. National Oceanic and Atmospheric Administration of warmer temperatures for most of Canada and the U.S. this winter.

"Above-normal temperatures expected in the Northeastern states and provinces mean this region could have below-average demand for heating fuels," the board predicted in its most recent Winter Energy Outlook report.

South of the border, propane shortages have resulted in states of emergency being declared in Ohio, Michigan, Wisconsin and Arizona.

On Sunday, the U.S. Department of Transportation issued an emergency declaration, allowing propane tank operators to cross state lines through the Midwest, New England, and the central Atlantic states, and to drive for longer hours.

The shortage hasn't reached emergency levels in Canada, but Ontario's energy minister Bob Chiarelli said he's concerned.

"I understand how difficult this shortage has been for many families and businesses in Eastern Ontario," Chiarelli said in a statement.

"My office has been in touch with the Canadian Propane Association who issued a release the other week to assure customers these disruptions are expected to be short-term issue only and we are continuing to monitor the situation."

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