Propane is a more exciting and important fuel than ever before, both nationally and internationally. A valuable source of clean energy, propane enables consumers to reduce greenhouse gas emissions, doing their part for a safer environment and a sustainable climate future.
This guide takes a close look at how various propane industry trends are likely to play out into 2022 and beyond. Increased international demand for propane across several major sectors is expected to combine with low domestic prices and supply-related factors to perpetuate the export-focused market we have observed in recent years.
Propane Industry Trends for 2022
Forecasters make industry predictions based on historical trends and current market conditions. Below are several of the predicted trends for 2022:
1. U.S. Propane Production and Exports
In 2022, the U.S. propane industry may face challenges in production and exports. Supply issues will likely pose a concern.
In 2020 and 2021, the propane market experienced historically low inventories that affected supply.The best estimates for very early 2022 currently forecast U.S. gas plants to produce only27 to 28 billion gallons of propane a year, or about 1.8 million barrels per day. U.S. propane exports for the same time frame will likely be 1.4 million barrels per day — almost the entire amount produced.
Even though propane stores have dropped, export volumes have remained high because of low domestic prices. The result is now a depleted stock. Combined with only moderate production growth, that low stock means the U.S. will have a limited propane supply for further export. Exports in 2022 may not show the year-over-year growth they have seen in the past.
2. Propane Inventories
The combination of low domestic production levels and near-record volumes of imports means current propane inventories are minimal. Forecasts predict that 2022 reserves will lag even beyond 2021 inventories until mid-year.
Propane inventories will likely drop to roughly30 million barrels in March of 2022before reaching 59 million barrels in June. That figure is projected to increase until peaking in September and then falling again, following the regular annual trend in the industry.
3. Price of Propane
In recent years, the domestic cost of propane has been outside of specific price peaks. In early 2020, Mont Belvieu propane prices fell to a relativelow of $0.203 per gallon. Since then, it has risen briefly and fallen again. Prices peaked at $1.491 per gallon in late 2021 before dropping to about $1.123 per gallon in early 2022.
Forecasts predict propane prices will rise ashigh as $2.57 per gallonin 2022. Correspondingly, U.S. households that heat their homes with propane will likely see their heating costs increase byapproximately 54% in 2022. They could spend up to 94% more in a very cold winter or only 24% more in a mild winter.
4. Supply Chain Factors
One potential supply chain complication for propane production and exports is a decrease in natural gas and crude oil production. Propane is a byproduct of natural gas processing and, occasionally, crude oil refining.As the COVID-19 pandemic has prompted travel restrictions, theglobal demand for petroleum and natural gashas fallen. Diminished propane production is the natural consequence.
The ongoing COVID-19 pandemic may also lead to propane suppliers facing a decreased workforce as employees quarantine. Diminished productivity in the supply chain may result in a lower overall propane output.
Cold winter weather can also cause supply chain issues if higher-than-expected demand significantly depletes inventories.
5. Increasing Demand for Propane As a Clean Source of Heating and Cooking Fuel
Demand for propane is likely to rise domestically and internationally as consumers seek clean household energy sources.
During the COVID-19 pandemic, demand for propane rose as consumers spent time in lockdown or began working from home. More time spent at home has often meant more cooking opportunities and the increased necessity for maintaining warm, comfortable household temperatures. Propane is attractive as a clean, responsible, high-quality fuel option for these uses.
6. Increasing Demand for Propane As an Automotive and Transportation Fuel
Consumer desire for cleaner fuels will fuel increased demand for propane through 2022.
Demand for propane as an alternative automotive and transportation fuel is particularly strong in Asia-Pacific countries. Increasing levels of air pollution, especially in countries like China and India, have led to a surge in interest in cleaner fuels. Several local clean-air initiatives promoting alternative fuels have given rise to a robust autogas market in China. This market has led to increased opportunities for propane imports from abroad.
7. Increasing Demand for Low-Emission Sustainable Fuels
Much of the interest in propane as an automotive and transportation fuel stems from its minimal carbon emissions. Compared to gasoline, propane is a much more sustainable option.
Many U.S. municipalities and school districts in the United States have begun switching to propane-powered vehiclesbecause of propane’s lower emissions levels. In West Virginia, propane-powered school buses reduced carbon emissions by 13% and harmful nitrous oxide (NOx) emissions by 95% to 96% over diesel buses. In 2017, there were25,969 propane-fueled fleet vehiclessuch as police cars, school buses, trucks, taxis and shuttle buses on the road.
Research has demonstrated the harmful effects of diesel fumes on schoolchildren’s health, indicating that propane is also safer from a health perspective.
One potential challenge associated with the use of propane autogas is fuel economy. A gallon of propane provides less energy than a gallon of regular gasoline, so vehicles use more propane fuel to get the mileage they would achieve with gasoline. However, propane-powered vehicles offer additional benefits that often outweigh these challenges.
For example,propane hasan octane rating of over 120, versus the standard 84 to 93 for gasoline. Some propane vehicle manufacturers optimize their engines to maximize the benefits of the higher octane rating, improving performance and boosting fuel economy. Propane vehicles’ lower carbon emissions and higher resistance to oil contamination also mean more money saved on maintenance costs, more time saved on maintenance and repairs and longer engine life.
The international popularity of propane autogas is rising significantly. Some governments sponsor propane-powered vehicles through tax rebates and subsidies for low-emissions vehicles.
Propane Industry Outlook Beyond 2022
Further than 2022, we can still make educated predictions about how the industry will look in the distant future. Propane’s prospects are bright, as demand will remain strong and production will likely rise.
1. Propane Industry Expected to Grow
The propane industry will likely expand well beyond 2022. We’re likely to see a compound annual growth rate (CAGR) of 4% or more through 2026. The Asia-Pacific region will almost certainly continue to be the largest and fastest-growing market. Propane’s utility as a clean, sustainable alternative fuel will lead to expanding domestic and international markets.
2. Increasing Demand for Low-Emission Sustainable Fuels
As the world contends with a burgeoning population, rising pollution levels and the increasing urgency of climate change, demand for sustainable fuels like propane will increase. Because it produces significantly fewer carbon emissions than fuels like gasoline, propane is likely to become highly sought after, especially in countries with large populations and high pollution levels.
In the United States, the Environmental Protection Agency (EPA) intends to tighten emissions regulations for 2023 and beyond. Passenger cars and light trucks with model years from 2023 through 2026 must comply with more stringent standards than vehicles on the road today, and the stringency of the standards will increase every year. The improvements call foran initial 10% emissions reductionand a 5% emissions reduction every year after that.
Hybrid and electric vehicles will likely be a key component of the transition to more sustainable fuels, and propane-powered vehicles can be another. The EPA estimates that their more robust requirements will significantly impact air pollution and atmospheric carbon levels. Adherence to these regulations will enable the United States to avoid emissions of 2.2 billion tons of greenhouse gases from 2023 through 2050.
3. Increasing Demand for Propane As an Automotive and Transportation Fuel
Propane will likely become more popular in automotive and other transportation applications thanks to its clean-burning properties, as well as its relative affordability and safety.
New propane-powered vehicles that have come onto the market in recent years, both light-duty and medium-duty, have fueled an increased demand for propane to run them. This demand is driving propane industry growth and will likely continue to do so in 2022.
Passenger cars will likely bethe largest international marketfor propane-powered vehiclesthrough 2026, while the heavy-duty truck market will see the most growth.
Some of propane’s popularity as an alternative fuel relates to population growth. As of January 2022, the global populationstood at about 7.9 billion people. By 2025, that figure is projected to rise to 8.1 billion. A growing population means more commuters, more travelers and more vehicles on the road, sending even more carbon emissions into an increasingly polluted atmosphere. Clean-burning propane offers an ideal solution to diminish these adverse population-growth impacts.
What Are the Major Regional Markets for Propane?
Demand for propane, often known outside the U.S. as liquified propane gas (LPG), is higher in some areas of the world than in others. Here are a few of the locations that make up propane’s most important regional markets:
- Asia-Pacific:The Asia-Pacific region is by far the largest and fastest-growing market. It dominates global propane consumption, with the highest demand coming from China and India. Japan and South Korea are also major propane consumers in the region.
- North America:The United States, Canada and Mexico are significant propane consumers. Propane is useful here commercially, residentially and industrially. Much of this residential use comes from rural areas like the U.S. Midwest, where natural gas infrastructure does not reach.
- Europe:In Europe, countries like Spain, Germany, Italy, France and the United Kingdom are major propane consumers.About 48% of propane usein the European Union (EU) goes toward residential heating, 33% goes toward road transportation and 19% enables industrial heat and power generation. LPG supplies heat to 20 million EU citizens and700,000 businesses, and LPG autogas fuels 15 million vehicles.
- South America:Propane is a significant fuel in South America. Countries like Brazil and Argentina are the most prominent propane consumers. Historically, Latin American propane producers operated in a closed market with state-controlled prices. However, energy industry investment has undergone privatization in the past several years, which has opened the market to a flood of imports and increased price competition. The expansion of the Panama Canal has also made propane imports into the region more efficient.
- Middle East:Countries like Saudi Arabia in the Middle East are propane consumers, though they are better known as propane producers. After producing relatively modest volumes of propane liquids for years — roughly175 million to 195 million barrels a yearthrough 2016 — Saudia Aramco has dramatically increased production, accounting for 500 million barrels or more from 2018 onward.
What Are the Major End-Use Industries of Propane in the Market?
While propane is versatile in its uses, demand tends to concentrate in a few specific sectors:
- Transportation:The transportation industry is increasingly turning to propane as a green, sustainable, low-emission alternative fuel source. Transportation uses propane in low-emissions vehicles more frequently than any other alternative fuel.
- Residential:Propane serves as a clean, sustainable fuel for home heating and cooking. In the United States,about 11.8 million households, particularly in rural areas, rely on propane as a major fuel source. About 42 million U.S. households also use propane to power outdoor grills. Globally, figures for residential heating and cooking use are higher. As of 2014, international residential use accounted for44 percent of all propane production, though rising demand for propane in transportation has altered the equation somewhat.
- Commercial:Propane is also useful for commercial heating and cooking. Restaurants often use propane for cooking fuel and heat lamps in outdoor heating spaces. Many commercial enterprises use propane as a clean fuel for heating in the winter.
- Industrial:The industrial sector accounts forabout 12% of global propane use. Nearly half of that propane powers plastic production. Propane is also useful in industries such as petrochemical production.
Though these tend to be the major end-use industries for propane, the market is also strong in sectors like construction, agriculture andpower generation.
Who Are the Key Propane Industry Players?
Several notable names dominate the propane market, many of which are major oil companies that have turned their attention to propane as the market grows more promising. Here are a few of those key players:
- ExxonMobil
- Royal Dutch Shell
- China Petroleum and Chemical Corporation
- Gazprom
- Saudi Arabia Oil Co. (Saudi Aramco)
Major oil corporations have extensive global facilities devoted to natural gas production and can generate significant quantities of propane for the market.
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Further Reading
Why Do Propane Prices Fluctuate?
Is the Propane Industry Growing?
How Big Is the Propane Industry?
Advice to Someone Starting a Career in the Propane Industry
4 Commercial Uses for Propane
Which Industries Use the Most Propane?
The Past, Present and Future of the Propane Industry
Safe Driving Rules for Hauling 500+ Gallon Propane Tanks
FAQs
What is the future for propane? ›
By some estimates, the global propane market could reach 212.8 million tons by 2027. If this expected increase occurs, the compound annual growth rate (CAGR), which measures the average growth over a specified time frame, would be 4.1%.
What industry uses the most propane? ›Nearly half of the propane consumed by industry is used to make plastic. Industries also use propane to run machinery, cut metal, and for process heat. Propane is also used to produce materials such as aerosol propellants, solvents, and synthetic vulcanized rubber.
What is the largest market for propane gas? ›Asia Pacific market registered largest revenue share in terms of revenue in 2021. With an estimated 20% market revenue, China consumes more propane than any other country. According to the ITC trade map, China imported 14.8 million metric tons of propane in 2020 to meet significantly high domestic demand.
Is there a propane shortage in the United States? ›While a US winter shortage is no longer likely, market participants continue to worry that strong export demand will create further tightness into 2022, leading to a shortened off-season for propane producers.
Are propane prices expected to rise in 2022? ›Forecasts predict propane prices will rise as high as $2.57 per gallon in 2022. Correspondingly, U.S. households that heat their homes with propane will likely see their heating costs increase by approximately 54% in 2022. They could spend up to 94% more in a very cold winter or only 24% more in a mild winter.
Will propane ever be banned? ›The CA State Assembly voted this week to ban the sale of single-use one-pound propane canisters and Governor Gavin Newsom is expected to sign the bill (SB 1256) as soon as it reaches his desk. The ban takes effect in 2028 giving manufacturers and retailers time to scale up refillable propane canister options.
What state uses the most propane? ›A new report issued by the Propane Education & Research Council (PERC) indicates that Michigan passed California to become the top ranked state by total propane sales in 2018, after being ranked second in 2017. Michigan was also the top ranked state in residential sales, totaling 453 million gallons for 2018.
What is the disadvantage of propane as a fuel? ›Con: It Produces Fewer BTUs Per Gallon Than Oil
When you measure how hot propane burns alongside other fuels, it's a little disappointing. Propane doesn't produce as much heat as oil. That means that although the cost of propane might beat oil, you're going to have to use more to get the same cozy indoor temperature.
Propane is a by-product of natural gas processing and crude oil refining, with almost equal amounts of production derived from each of these sources. Most of the propane consumed in the United States is produced in North America.
How big is the propane industry? ›...
| Attribute | Details |
|---|---|
| Base year for estimation | 2016 |
| Actual estimates/Historical data | 2014 - 2016 |
| Forecast period | 2017 - 2025 |
| Market representation | Volume in Million Tons, revenue in USD Billion and CAGR from 2017 to 2025 |
What gas is propane? ›
Also known as liquefied petroleum gas (LPG) or propane autogas, propane is a clean-burning alternative fuel that's been used for decades to power light-, medium-, and heavy-duty propane vehicles. Propane is a three-carbon alkane gas (C3H8). It is stored under pressure inside a tank as a colorless, odorless liquid.
Is non odorized propane sold in the US? ›Non-odorized propane sales to petchems in 2020 totaled 4.87 billion gallons – about 52 percent of total U.S. retail propane sales. Texas sold about 82 percent of these gallons, used to produce ethylene and propylene.
Is propane becoming scarce? ›The potential propane shortage of 2021 has led many people and governments to consider alternative sources of heat and energy. There have been long-term goals in place for a long time to reduce the amount of propane and natural gas consumption. But a crisis like this might increase the urgency of these initiatives.
Is it worth switching from electric to propane? ›Because propane is a more efficient fuel, it costs less to operate. Propane appliances also generally have a longer lifespan than their electric counterparts, saving you both money and peace of mind in the long run.
Why are propane tanks out of stock everywhere? ›The company says there's a shortage of supply in steel and manufacturing. “The propane industry has experienced shortages in supply just like all industry has, so propane tanks are a little slower to get today than they were a few years ago,” said Mike Hayden, propane manager of Co-Alliance Cooperative.
Are propane prices expected to rise in 2023? ›The United States Energy Information Administration (EIA) forecasts that a variety of U.S. energy prices will remain historically high through 2023, including oil, natural gas, coal and electricity, according to EIA's June 2022 "Short-Term Energy Outlook (STEO)".
Should I buy propane now or wait? ›In most cases, prices are lower in the warmer months and higher during the winter, but prices can even fluctuate throughout the summer. These fluctuations can be minor, but even a few cents can make a difference. If you have a 500-gallon tank, a decrease of 20 cents per gallon can save you money.
What month is propane The cheapest? ›The cheapest time to buy propane lies between late September to early October. The reasons that propane becomes inexpensive during this time are: Stable weather conditions. Low demand.
What will replace propane? ›If you are in search of a gaseous replacement for natural gas, biomass is an option. Specifically, biomass is a great alternative if you live in a rural area and it's difficult to access natural gas or propane. Biomass can heat appliances and act as a portable cooking source if you're a camper.
What is the future of propane prices? ›EIA has also forecasted that homes could see a further increase in propane prices by approximately 54% in 2022. Fluctuations, depending on the demand in winter, could range between 24% and 94% in price increase. Supplemental forecasts predict wholesale propane prices will rise as high as $2.57 per gallon.
Are propane furnaces being phased out? ›
California Moves to Ban Natural Gas Furnaces and Heaters by 2030.
Does propane cost more than oil? ›As a general rule of thumb, propane is cheaper per BTU than heating oil.
Is natural gas cheaper than propane? ›Propane is more expensive than natural gas but natural gas burns much faster than propane. In fact, it burns at a rate of two to one. This means that to heat two spaces of the same size, you'll use twice as much natural gas than propane.
Does propane burn cleaner than oil? ›Environmental Impact
Heating oil produces approximately 22 pounds of CO2 per gallon more than propane. Propane is the second cleanest-burning fuel available. Propane furnaces also require substantially less maintenance than oil furnaces as a result.
Propane is cheaper than electric: According to the U.S. Department of Energy, heating a home in the U.S. with a propane heating system in recent years has cost far less than heating with an electric system.
How bad is propane for the environment? ›Propane gas is not harmful to the environment. Of course like any gas, propane will have some level of emissions. However, it is fairly low compared to other fuels. Actually, while propane does emit low levels of carbon dioxide, it does not emit any wastes such as sulfur dioxide, nitrogen oxides or methane.
What is the cheapest fuel to heat a house? ›Natural gas tends to be the most affordable of these options, with the federal Energy Information Administration (EIA) reporting that the average seasonal cost of natural gas heating is currently about 70 percent less per household than for households with oil heat.
Is the US exporting propane? ›US LPG exports to Asia-Pacific are expected to continue to grow in 2022 as strong petrochemical demand in the region bolsters the sector's buying of US feedstocks, particularly propane, while domestic production expands.
Does propane go bad? ›Does propane expire? Another way you get peace of mind with propane delivery from Bottini Fuel is that propane doesn't have a shelf life or an expiration date. That's because propane doesn't go bad! Other fuel sources can degrade over time, like kerosene, diesel, heating oil and gasoline.
Does the US import propane? ›Most U.S. imports of propane and butanes are received by rail from Canada into the Midwest and Northeast regions of the United States. These imports are highly seasonal, with two-thirds of imports occurring in October through March.
Does propane or natural gas burn cleaner? ›
Propane is the cleanest burning fossil fuel available, and it produces about half the carbon dioxide and other emissions of gasoline. It also doesn't harm water or soil. Natural gas is mostly made up of methane, a greenhouse gas that's about 84 times more potent than carbon dioxide.
What is the structure formula of propane? › How is crude oil formed? ›Dead critters, plenty of pressure, a lot of heat, and hundreds of thousands of years in time. Crude oil is formed from the remains of dead organisms (diatoms) such as algae and zooplankton that existed millions of years ago in a marine environment. These organisms were the dominant forms of life on earth at the time.
How much propane is left in the world? ›How to Tell How Much Propane Is Left for Your Gas Grill - CHOW Tip
What is the cleanest burning fuel? ›When natural gas is burned, it produces mostly carbon dioxide and water vapor -- the same substances emitted when humans exhale. Compared with some other fossil fuels, natural gas emits the least amount of carbon dioxide into the air when combusted -- making natural gas the cleanest burning fossil fuel of all.
Is propane an explosive? ›Propane is explosive and propane can explode but a propane-LPG tank explosion is actually very rare. Propane tanks (gas cylinders) can explode but not easily or often.
What is the additive in propane that smells? ›Propane companies add a harmless chemical called mercaptan to give it its distinctive “rotten egg” smell. All propane pipeline gas in Connecticut is odorized.
Why are odorants added to propane? ›Propane is a colorless and odorless gas, therefore an odorant, currently ethyl mercaptan, is added to allow for its detection. This smell resembles that of rotten eggs.
Can you buy pure propane? ›Air Liquide manufactures propane pure gas with up to 99.9% purity. It is used in a variety of applications, including chemical synthesis, refrigeration and flame gas (AAS).
Will propane prices go up in 2023? ›Heating bill costs for winter 2023
Heating oil costs will rise by about 27% ($2,354). Electricity costs will rise about 10% compared to last year ($1,359). Any homes using propane will see a 5% increase ($1,668).
Are propane furnaces being phased out? ›
California Moves to Ban Natural Gas Furnaces and Heaters by 2030.
Is natural gas cheaper than propane? ›Propane is more expensive than natural gas but natural gas burns much faster than propane. In fact, it burns at a rate of two to one. This means that to heat two spaces of the same size, you'll use twice as much natural gas than propane.
Is propane bad for climate? ›Although natural gas is considered a greenhouse gas, it burns cleanly and therefore leaves a reduced carbon footprint. Propane is an environmentally friendly fuel both before and after combustion and therefore does not leave a detrimental impact on the environment.
Should I buy propane now or wait? ›In most cases, prices are lower in the warmer months and higher during the winter, but prices can even fluctuate throughout the summer. These fluctuations can be minor, but even a few cents can make a difference. If you have a 500-gallon tank, a decrease of 20 cents per gallon can save you money.
What month is propane The cheapest? ›The cheapest time to buy propane lies between late September to early October. The reasons that propane becomes inexpensive during this time are: Stable weather conditions. Low demand.
Is propane cheaper than electricity? ›Propane is cheaper than electric: According to the U.S. Department of Energy, heating a home in the U.S. with a propane heating system in recent years has cost far less than heating with an electric system.
What is the future of propane prices? ›EIA has also forecasted that homes could see a further increase in propane prices by approximately 54% in 2022. Fluctuations, depending on the demand in winter, could range between 24% and 94% in price increase. Supplemental forecasts predict wholesale propane prices will rise as high as $2.57 per gallon.
What will replace propane? ›If you are in search of a gaseous replacement for natural gas, biomass is an option. Specifically, biomass is a great alternative if you live in a rural area and it's difficult to access natural gas or propane. Biomass can heat appliances and act as a portable cooking source if you're a camper.
Is propane cheaper than gas for heating? ›Cost. If the natural gas price is $15.00 per 1,000 cubic feet, the same $15.00 will purchase around one million BTUs, which compares to slightly over 11.20 gallons of propane. If propane costs $2.50 per gallon, using this as an example, natural gas is the cheaper option.
What are the disadvantages of propane? ›Con: It Produces Fewer BTUs Per Gallon Than Oil
When you measure how hot propane burns alongside other fuels, it's a little disappointing. Propane doesn't produce as much heat as oil. That means that although the cost of propane might beat oil, you're going to have to use more to get the same cozy indoor temperature.
How much propane does it take to heat a 2000 square foot house? ›
A 2,000 square foot home in a “mild” climate—think of the deeper southeast or southwest United States—would require approximately 2 million BTUs of propane and cost about $76 on average per month to heat.
How much does it cost to fill a 500-gallon propane tank? ›In short, filling a 500-gallon propane tank costs anywhere from $600 to $1,600 (for $1.50/gallon to $4.50/gallon propane prices).
Is propane as polluting as natural gas? ›Propane is non-toxic and will not harm water or soil. Natural gas is a clean-burning greenhouse gas, meaning it emits lower levels of harmful emissions like carbon monoxide, carbon dioxide, and nitrous oxides.
Which pollutes more natural gas or propane? ›Natural gas has higher upstream emissions than propane. This is because the refining process of natural gas releases methane and other gases. Propane is a clean-burning fuel that's approved by US energy administrative bodies and policy-makers.
Is propane better for the environment than oil? ›Propane is much better for the environment because it is totally clean-burning and produces far fewer emissions than oil. It has a lower carbon content than fuel oil, gasoline, diesel, kerosene and ethanol and contains significantly less greenhouse gas emissions per productivity unit compared to other fuels.