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Propane shortage has Ontario pressing for federal intervention

Mike Foster, an employee at Van Etten Oil Company in Monticello, N.Y., returns a filling hose to his propane truck on Jan. 23, 2014.

JOHN DESANTO/ASSOCIATED PRESS

Ontario Energy Minister Bob Chiarelli is putting pressure on the federal government to take action in the face of a propane supply crunch that has caused wholesale prices to double since early October, hitting record levels.

In a letter to Natural Resources Minister Joe Oliver released Monday, Mr. Chiarelli urged his federal counterpart to conduct a teleconference with provincial and territorial ministers to come up with a "pan-Canadian response" to the fuel problems being experienced mainly by rural households and industrial users.

"I would be most interested in understanding your analysis of the propane shortage and, given that it is inter-provincially transported, what measures your government has or is contemplating undertaking to address and remedy the shortages and the accompanying price spikes," the Ontario minister wrote.

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In an e-mailed statement, Mr. Oliver said the government is concerned about the situation facing propane customers in Ontario and Quebec.

He added that, while Ottawa does not regulate the pricing or distribution of propane, officials "have pro-actively reached out to the province on this matter.

"While the provinces have primary responsibility for managing energy supplies within their boundaries, we are monitoring the situation closely."

The Canadian Propane Association said there is plenty of propane supply in North America but that cold weather has caused a spike in demand and there have been some logistical problem that have caused local shortages.

"In some cases, it is access to supply – not that there is none, but not all retailers are experiencing the issues in the same region where some are," said Andrea Lebelle, the association's general manager. But prices are set on the North American market, and the early and frigid winter across much of the continent has caused consumption and hence prices to soar.

"It is basic Economics 101; it's supply and demand. Everybody needs it and we don't set prices," she said.

Ms. Labelle said regulations would not have prevented the crunch, adding it's not clear what Ottawa and the provinces could do to alleviate it. "While we don't believe additional regulations would have resolved the challenges that are happening now, all stakeholders including the Ontario government will work together to ensure customers receive propane in a timely manner."

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In his letter, Mr. Chiarelli noted that propane prices at the Sarnia hub rose by 109 per cent from early October to last Friday, when they hit a record 71.5 cents per litre. A falling dollar would be another factor in higher prices to Canadian consumers because, like most energy products, propane is priced in U.S. dollars.

Propane – like butane and ethane – is a liquid component of natural gas that is often produced along with the dry methane. In recent years, producers have targeted fields that contain a lot of liquids because the price for natural gas itself has been so low. A year ago, companies worried that the glut of natural gas liquids was driving down prices.

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About the Author
Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

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