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Propane or Liquefied Petroleum Gas (LPG)


Liquefied petroleum gas (LPG) is a mixture of gaseous hydrocarbons, mainly propane and butane that change into liquid form under moderate pressure. LPG (usually called just propane) is commonly used as a fuel for rural homes for space and water heating, as a fuel for barbecues and recreational vehicles, and as a transportation fuel. It is normally created as a by-product of petroleum refining and from natural gas production.

graphic of propane molecule Propane's chemical formula is C3H8 (see picture to the left). Propane is a gas that can be turned into a liquid at a moderate pressure, 160 pounds per square inch (psi), and is stored in pressure tanks at about 200 psi at 100 degrees Fahrenheit. When propane is drawn from a tank, it changes back to a gas before it is burned in a furnace, stove, or vehicle engine. According to the American Petroleum Institute, about one-half of the propane in the United States is used in the petrochemical industry (49%), followed by residential and commercial use (40%), farm use (5%), industrial use (3%), and transportation (3%).

U.S. Propane Usage Statistics

Residential Propane Customers 14,300,000
Commercial Propane Customers 1,040,000
Industrial Propane Customers 240,000
Propane Forklift Customers 456,000
Agricultural Propane Customer 81,000
Fleet Propane Customers 660,000
LPG Standby Generator Customers 110,000
Households Heating With Propane 6,880,000
Propane Grill Users 47,000,000

Source: Propane 101, unknown date for data.

Propane Prices

Propane prices vary in different parts of the country. So, you can't really compare the price paid in New England to the price paid in California. This is because of two key reasons that are related to supply and demand: weather influences and location.

In the short-term, the demand for propane among residential and commercial customers is affected significantly by weather. Because weather conditions change rapidly, large and sudden shifts in demand can occur, creating imbalances that result in price movements.

These weather factors can also influence the propane distribution system. As with all energy sources, propane prices are influenced by the systems required to transport the energy source from where it is produced to where it is used, whether through pipelines, ships, or trucks.

Propane prices are also influenced by proximity of the customer to the supply. In an area such as the Gulf Coast, customers are close to major suppliers and shipping ports, so the effort needed to get propane to its customers is minimal. Those customers who live farther away usually pay higher prices when transportation costs are added.

Spot and Winter Wholesale LPG Prices Generally Track Those of Gasoline
                                          (cents per actual gallon)

graphic showing propane prices vs. gasoline and oil from 1992 to 2004

Sources: Text: "Propane Prices, What Consumers Should Know," U.S. Energy Information Administration, September 2003.
Chart: California Alternative Fuels Market Assessment 2006, publication @ CEC_600-2006-015-D

Propane as an Transportation Fuel

Propane has been used as a transportation fuel since 1912 and is the third most commonly used fuel in the United States, behind gasoline and diesel. More than four million vehicles fueled by propane are in use around the world in light-, medium-, and heavy-duty applications. Propane holds approximately 86 percent of the energy of gasoline and so requires more storage volume to drive a range equivalent to gasoline, but it is generally price-competitive on a cents-per-mile-driven basis.

For more about propane as a transportation fuel, please visit the following:

LPG Transportation Fuel Use in California 2004

Number of LPG vehicles (2004) 22,000
Fraction of on-road population, % 0.091
OEM LDV models offered (2006) 0
LDV engines certified (2006) 0
HDV engines certified (2006) 4
LPG stations, total 235
public assess 234
LPG dispensed, million gallons 26
million gallons gasoline equivalent 19
petroleum fuel fraction, % 0.098

Source: California Alternative Fuels Market Assessment 2006, publication no. CEC-600-2006-015-D, data from Clean Fuel USA

Propane in California

Propane is basically an unregulated fuel in California (except for storage and safety issues which are regulated). Prices are set by supply and demand. Because it is an unregulated commodity, no data is collected by the state on LPG sales or usage.