Propane Prices in the Northeast & ME2 Pipeline

A lot of the talk and chatter this week has been about the spike in the price of natural gas (see today’s lead story, NatGas Trading in NYC Hits $175/Mcf – Highest Ever Recorded!). The other hot topic of the week is the decision by the Pennsylvania Dept. of Environmental Protection (DEP) to temporarily suspend all construction work on the Mariner East 2 (ME2) Pipeline. What antis in the Philadelphia area don’t realize is that ME2 is vital to their own region and their own pocketbooks. Yesterday we brought you one take on why Philly residents are missing the boat in opposing ME2 (see It’s Time We Stop Missing the Point About the Mariner East Pipes). In that guest post, MDN friend Garland Thompson makes the salient point that jobs and the Philly economy are tied to petrochemicals and the NGLs that will flow through the Mariner East pipelines. Today we bring you another article about why ME2 is so vital to the Philly area: the cost of propane. One of the primary NGLs that will flow through ME2 is propane, used in a variety of applications, but particularly used in places where there are not natural gas pipelines to deliver gas to homes (like the various suburbs around Philly, the ones opposing ME2). Propane prices are going up because (a) much of the propane produced by Marcellus/Utica drillers goes by railcars to Kansas, where it catches a ride on a pipeline to the Gulf Coast, and (b) the propane that does come to the Philly area also comes via rail cars, at a much higher price than if it were shipped via pipeline. Add to that other countries want our propane and are bidding the price up–and you have a prescription for spiking propane prices around Philly. The article below delves into the business of propane, explaining terms you may have heard but don’t know what they mean–like “contango” and “backwardation.” Buckle up–here’s a deep dive into the economics of propane, and why Philadelphia desperately needs the ME2 pipeline–without delay…

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