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'Something is not right': Lawmakers press for probe of soaring propane prices

propane gas tank rising costs.jpg

Jan. 26, 2014 in North Branch, Minn.: Propane tank.AP

As more than half the nation has spent weeks in a deep freeze, the price of propane -- used for everything from heating homes to powering farms -- has skyrocketed, leading Washington lawmakers to question whether producers are manipulating the market. 

The impact of record prices is particularly pronounced in rural states, where propane is more commonly used. In Colorado, residents saw prices nearly tripling in the past two weeks as freezing weather in the Midwest boosted demand on an already tight supply in the state. Since Jan. 16, prices have jumped to as much as $6 a gallon from $2.30.

In Iowa, Republican Sen. Chuck Grassley has asked the Federal Trade Commission for a review of the market to make sure there are no cases of blatant production manipulation, which in turn would cause prices to rise.

In the Jan. 23 letter, Grassley asks the FTC to “remain vigilant in overseeing the propane market to prevent possible anti-competitive behavior or illegal manipulation, and to ensure that any supply shortages are not created artificially.”

“The recent propane supply shortage and price increases are causing hardship for the many rural Iowa families that use propane to heat their homes,” Grassley said in a separate statement. “I’m asking the agency that oversees business practices to look at the propane situation and see whether the price increases are legitimate or manipulated in any way to consumers’ detriment.”

Sen. Tom Harkin, D-Iowa, also said he’s working to determine the "cause for the rising costs.”

“Something is not right here, and we need some answers,” Harkin said when asked about the propane situation at a visit to the Iowa statehouse Monday.

The news isn’t much better elsewhere.

The national average price for propane climbed this week to more than $4 a gallon, up $1 since last week. Industry and state officials say the price jumps are because supplies were stripped after last year’s harvest when farmers needed to dry an unusually large amount of grain.

Propane is used in operations from drying grain to heating poultry and livestock housing. The hikes hit farmers and agriculture operations the hardest. 

Propane producers don't claim to have an explanation for the shortage and price spike either. "We're all asking the same question: What's going on here?" Deb Grooms, executive director of the Iowa Propane Gas Association, said.

In an interview with Reuters on Thursday, Energy Secretary Ernest Moniz said the department is looking for fixes. Moniz said “many factors” were at play, beginning with a jump in demand for propane in the upper Midwest during a wet autumn followed by the country getting clobbered by the “polar vortex” that saw temperatures hitting historic lows across much of the U.S.

"We are in direct communication with the Department of Transportation, the Department of Commerce, and the Domestic Policy Council at the White House so we can bring whatever we can to bear on this issue," Moniz said.

According to the Energy Information Administration, supplies of propane in the Midwest fell by 1.34 million barrels to 10.2 million last week – coming in at the lowest level for mid-January since the EIA started keeping data 21 years ago.

Propane supplies across the country fell by 3.39 million barrels to 35.3 million – the lowest level since June 2011.

The Associated Press contributed to this report.