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.
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.
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.