The rising cost of LPG in Australia


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The rising cost of LPG in Australia

Only a few years ago, Liquid Petroleum Gas (LPG) was considered the motorist's saviour; an alternative fuel to soaring petrol costs. Somehow LPG has lost its appeal with the public - what's happened?

Liquid Petroleum Gas (LPG) was first identified as an important component of petroleum in 1910i. In the following decades, extraction, storage and transportation methods have developed and various uses for LPG have been explored. After the oil crisis of 1973ii, production, export and wider utilisation of LPG as a fuel expanded rapidly, including in the car industry.

LPG was only a few years ago considered the motorist's saviour; an alternative fuel to soaring unleaded petrol costs.

The rising cost of LPG

The wholesale price of LPG has been deregulated since 1991 and Australian producers trade it as an international commodity in US dollarsiii. The Saudi Aramco Contract Price (Saudi CP) is expressed in US dollars per metric tonne. While Australia has large stocks of both naturally occurring LPG and refinery produced LPGiv, Australia is both an exporter and importer of LPG. Consequently, local LPG prices are directly affected by the Saudi CP, and motorists have reported a great deal of volatility in the price of the fuel.

There are significant variations in pump price between different regionsv set against an overall trend of a rising average price nationally. Australian LPG prices also trend upwards in response to the peak demand periods of North American and European wintersvi. In the northern hemisphere, LPG is a popular heating fuel. Recent winter weather conditions in the Northern Hemisphere have been far more severe than usual, adding to the demand for fuels, including LPGvi.

Incentives to promote LPG

In recent years, the Federal Government has offered grants for new LPG vehicles, and also for converting already registered vehicles to run on LPGvii.

Conversions were sometimes to LPG only fuelling, but also to a "dual fuel" capacity, which means the vehicle driver is able to switch between the original fuel source and LPG as desired. Even though the cost of conversions might range between $1,500 and $4,500viii, conversions have been popular with owners of commercial vehicles due to the fact that the installation cost can be offset by fuel savingsix.

The introduction of the larger grant of $2,000 for new LPG vehicle purchases in 2006x has also provided support for sales of dedicated LPG vehicles, of which Ford’s LPG Falcon is the best known example and the mainstay of the taxi industryxii.

Vehicles with engines converted to take LPG still remain a small fraction of the Australian car fleet.

Future of LPG powered vehicles in Australia

Unfortunately for LPG specialists and other users of LPG powered vehicles, the LPG Government Grant scheme is closing on the 30th June 2014xi. The government is also considering raising excise on LPG to 12.5 cents per litre in 2015xii, which would further close the gap between LPG and petrol prices.

Despite the benefits of LPG, vehicles powered by the fuel have remained as a small fraction of Australia's light vehicle fleet. In 2001, LPG vehicles were 2.5 per cent of the light vehicle fleet. This proportion peaked in 2010 at 3.4 per cent and has been declining sincexiii.

Ten years ago, the average price of unleaded petrol in Sydney was approximately 102 cents per litre, compared to approximately 45 cents per litre for LPGxiv. The price advantage for consumers today is still significant, but has decreased; average prices in February for unleaded petrol and LPG in Sydney were 152 cents and 91 cents, respectivelyxv.

In other words, ten years ago LPG was about 44 per cent of the cost of unleaded per litre, whereas today it is approximately 60 per cent. Additionally, an LPG vehicle will generally consume about 25 per cent more fuel than its petrol powered counterpartxii. Taking this into consideration, the cost of fuel for an LPG vehicle ten years ago was just over half of the fuel cost for a petrol engine vehicle of the same model, engine capacity and workload. Today, making the same comparison, the relative cost of LPG is about 75 per cent of that of petrol.xiv,xv.


iHahn E, 'History and Origin of LPG Gas', elgas.com.au, viewed 23 March 2014,
http://www.elgas.com.au/blog/454-history-origin-lpg-gas-bottles-cylinders

iiexceptionalenergy.com, History of LPG, viewed 23 March 2014,
http://www.exceptionalenergy.com/en_GB/what-is-lpg/history

iiiraa.com.au, Fuel Information/ Fuel Types/LPG - LPG Prices, viewed 22 March 2014,
http://www.raa.com.au/motoring-and-road-safety/fuel-information/lpg-prices

ivParliament of Australia Publications Archive, Liquefied Petroleum Gas (LPG) , viewed 30 March 2014,
http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Publications_Archive/archive/petrol

vLandy S 2013, 'LPG set to hit all-time prices high as prices past $1 per litre mark', Herald Sun News, 9th December, viewed 30 March 2014,
http://www.heraldsun.com.au/news/victoria/lpg-set-to-hit-alltime-prices-high-as-prices-past-1-per-litre-mark/story-fni0fit3-1226779218294

viCollett T 2013, 'Record High LPG prices predicted ahead of Northern Hemisphere winter', The Motor Report, 10th December, viewed 30 March 2014,
http://www.themotorreport.com.au/57828/record-high-lpg-prices-predicted-ahead-of-northern-hemisphere-winter

viiImpco.com.au, AusIndustry LPG Scheme / LPG Government Grant, viewed 23 March 2014,
http://www.impco.com.au/about-us/government-grant.html

viiiRepco.com.au, LPG Conversion & Installation, viewed 30 March 2014,
http://www.repcoservice.com/services/lpg-conversion-and-installation

ixAAAMechanical.com.au, Frequently Asked Questions About LPG, viewed 30 March 2014
http://www.aaamechanical.com.au/faq.htm

xAutomotive Alternative Fuels Registration Board (AAFRB), Government LPG Vehicle Grants, viewed 9 April 2014,
http://www.aafrb.com.au/ConsumerInfo/AboutLPG/LPGGrants.aspx

xiAusindustry.com.au, LPG Vehicle Scheme (LPGVS) , viewed 23 March 2014,
http://www.ausindustry.gov.au/programs/energy-fuels/lpgvs/Pages/default.aspx

xiiCollett T 2013, 'LPG: Still Cheaper and Cleaner, But What’s Happening Here?', The Motor Report, 8th April, viewed 30 March 2014,
http://www.themotorreport.com.au/56292/lpg-facts-figures-and-the-australian-situation

xiiiCrudeoilpeak.info, LPG, viewed 30 March 2014,
http://crudeoilpeak.info/lpg

xivDasey D 2004, 'Petrol prices fuel interest in LPG', Sydney Morning Herald, 15 August, viewed 30 March 2014,
http://www.smh.com.au/articles/2004/08/14/1092340534742.html

xvMotormouth.com.au, Historical Fuel Prices, viewed 30 March 2014,
http://motormouth.com.au/news/MediaData.aspx