Executive Summary
During the 2004/2005 heating season, Nebraska's propane prices were stable while heating oil prices leaped up, coasted down, and then fired back up. Factors that impact prices each season include: national and state inventory and import levels; refinery downtime; prices of crude oil and natural gas; the weather; the economy; and the political arena. All of these factors can lead to increased demand or lower-than-normal supplies during the winter heating season. Factors impacting 2004/2005 heating season prices were:
- Regional distillate inventory in the average range at the beginning of the heating season;
- Regional propane storage goal of 25 million barrels not attained during the traditional build season (April through September) although close with 24.4 million barrels on October 1;
- Strong propane imports;
- High crude oil prices;
- Continued high natural gas prices;
- Oil refinery shutdowns due to planned maintenance and unexpected hazards;
- Continued war with Iraq;
- Strengthening economy;
- Norwegian oil workers' strike;
- China's increase in demand for oil;
- Tropical Storm Bonnie and Hurricanes Charley, Frances, Ivan, and Jeanne;
- The fear of supply disruptions in Venezuela, Russia, Iraq, and Nigeria due to Venezuela's political situation surrounding the recall election, the Russian government's troublesome relationship with its largest oil producer, Yukos, and the uncertainties surrounding terrorism in Iraq and Nigeria; and
- Relatively normal winter temperatures (only 8 percent warmer than normal).
Of the factors that impact prices, weather remains the key wildcard each winter. The state had relatively normal winter temperatures since degree days indicated the weather to be warmer than normal by only 8 percent. The state had an estimated 5196 heating degree days from October to March compared to 5667 normal heating degree days during that period.
Heating oil prices began the most recent heating season 51 to 55 cents (or about 50 percent) higher than the previous three years. Towards the end of the 2004/2005 heating season, prices had begun to climb again and were 15 cents, or 9 percent, higher from prices at the beginning of the season.
Four-Year Comparison of the Average Heating Oil Price
2001/2002 to 2004/2005
The price spread from the 2001/2002 to the 2002/2003 heating season increased only slightly while the 2003/2004 heating season's spread decreased significantly in comparison to both prior seasons. A low price spread is indicative of stability--there were no big increases or decreases in price from week to week. The price spread of 57 cents for heating season 2004/2005 shows volatility. The graph below shows the lowest average price and highest average price per gallon of heating oil from the last four heating seasons and the difference, or spread, between the two prices.
Heating Oil Price Range and Spread Each Heating Season
2001/2002 to 2004/2005
The 2004/2005 heating season began with a propane price that was 23 cents higher than last year, 44 cents higher than two years, and 34 cents higher than three years ago. High crude oil and natural gas prices were major factors. Although the 2004/2005 heating season brought about much higher prices, those prices were relatively stable due to the mild winter.
During the 2003/2004 heating season, prices were stable although significantly higher due to the tight supply situation. While the 2002/2003 heating season had higher prices in January and February with a late price spike in March due to low supplies, the price trend during the 2001/2002 heating season was relatively flat or stable, taking into account a mild winter.
Four-Year Comparison of the Average Propane Price
2001/2002 to 2004/2005
The graph below shows the highest average price and the lowest average price per gallon of propane from the last four heating seasons and the difference, or spread, between the high and low prices. While having higher prices, the 2004/2005 heating season had the same price spread as heating season 2002/2003. The 2003/2004 heating season spread shows a spread consistent with the 2001/2002 level, indicating a tight range of prices. In 2002/2003, the increase from the previous year is seen in the high price while the low price remained consistent to the previous season. The price spread from the 2001/2002 to the 2002/2003 heating season showed a major increase.
Propane Price Range and Spread Each Heating Season
2001/2002 to 2004/2005
Introduction
This report summarizes the results of the heating oil and propane price survey during the 2004/2005 winter heating season in Nebraska. The Nebraska Energy Office conducted the survey under a cooperative agreement from the U.S. Department of Energy's Energy Information Administration.
Program Objectives
According to the 2000 census, over 10 percent or 68,768 homes in Nebraska use propane as the primary home heating fuel. More than 8,000 homes in Nebraska, or slightly more than one percent, use heating oil as the primary home heating fuel. The Nebraska Energy Office recognizes the need for winter fuels price information to fulfill these objectives: (1) to provide information to the Governor and the public regarding the price and status of winter fuels, (2) to prepare the agency to respond in an effective, efficient manner to potential heating fuel problems, and (3) to improve the state, regional, and national pictures of the winter heating fuel status.
Program Performance
The responsibilities of the Nebraska Energy Office included:
- Collection of each Monday's retail heating oil and propane prices from suppliers during the winter heating fuel season,
- Maintenance of price database,
- Weekly submission of the price data via an internet data collection system to the Energy Information Administration on a company-identifiable level to the extent permitted by State laws, and
- Preparation and submission of an annual report.
The responsibilities of the Energy Information Administration included:
- Preparation of a list of companies to be surveyed and the development of an estimation formula,
- Technical assistance,
- Publication of state, regional, and national data online,
- Review of annual reports for accuracy and consistency, and
- Preparation and distribution of a report to Congress, the states, and the public.
Methodology
The Nebraska Energy Office has participated in the State Heating Oil and Propane Program (SHOPP) for four years. Each year, the Energy Information Administration provides a list of companies to the Nebraska Energy Office. The companies are identified as residential distributors to be contacted regarding their participation in the price survey. The residential price survey for this heating season began on October 4, 2004, and was completed on March 14, 2005. Data from the survey was transmitted to the Energy Information Administration using the Internet Data Collection System. The Energy Information Administration compiled, processed, and aggregated each state's reported data, weighted and stratified against other data streams, to estimate each state's average price.
The Nebraska Energy Office publishes the data in these reports: Average Residential Propane Prices, Average Wholesale Propane Prices, Average Residential Heating Oil Prices, and Average Wholesale Heating Oil Prices. The Energy Information Administration publishes the data in the following reports: Residential Propane Prices by Region and State, Wholesale Propane Prices by Region and State, Residential Heating Oil Prices by Region and State, and Wholesale Heating Oil Prices by Region and State.
Residential Heating Oil Prices
The average home heating charge price for delivery of No. 2 heating oil, excluding taxes and cash discounts, in Nebraska for the 2004/2005 heating season was $1.63 per gallon. The season average leaped 49 cents higher than last season's average of $1.14 and 44 cents more than the four-year average of $1.19 per gallon.
The season averages for the last four years are listed in the following table:
