Propane

Missouri’s Total Bill for Propane at a Glance

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About Propane

Propane is a hydrocarbon (C3H8) and is sometimes referred to as liquefied petroleum gas, LP-gas or LPG. Propane is produced from both natural gas processing and crude oil refining in roughly equal amounts from each source.  Nearly 97 percent of propane consumed in the United States is produced in North America. It is nontoxic, colorless and virtually odorless. As with natural gas, an identifying odor is added so the gas can be readily detected.

Figure 1

Propane Costs
Missouri’s average price per gallon of propane increased by 4.01 percent (compound annual grow rate) over the 1990 to 2010 time frame.  Price per gallon during that time frame ranged from a low of $0.67 per gallon in 1992, to a high of $2.17 per gallon in 2008 (see Figure1).

Propane costs are variable due to a number of unpredictable factors that affect propane demand, supply and price. The demand pattern for propane is highly seasonal. Residential demand peaks during the winter heating season, and crop drying, the major agricultural use for propane, occurs in the autumn. Adequate inventories entering the heating season are critical to keep prices from increasing sharply. Price volatility can be induced by swings in the price of crude oil as well as changes in demand due to unusually mild or severe weather.

In 2008, an increasing international demand for oil, ongoing interruptions in international oil supply and a first time since 1973 decrease in non-OPEC oil production(1), was combined with an economic recession and the coldest winter since 2001. These combined factors contributed to record high prices for propane in 2008.

Figure 2

The price per gallon of propane dropped by 9.58 percent, (compound growth rate), in 2010, from a 2008 high of $2.17 to $1.91 in calendar year 2010. A total of 361,271,676 gallons of propane at a cost of $689 million were consumed in the state during 2010, making Missouri the 12th largest consumer of propane among all states in the United States.

Propane Consumption by Sector

Figure 3

Propane is the primary heating fuel for many Missouri households.  Residential demand for propane peaks during the winter heating season and the extent of the demand for propane depends heavily on the coldness of the winter.  As February 2010 came to an end, the preliminary average statewide temperature for the winter of 2010 in Missouri was 28.1 degrees F, which is similar to the cold winters of 1981-82 (27.6°F) and 2000-01 (28.3°F). The winter of 2010 ranked as the 13th coldest winter for the state over the past 116 years. Demand for propane in 2010 accounted for a consumption of 361,271,676 gallons of propane.

The residential sector accounted for about 56 percent of the state’s total propane consumption. The next largest consumer of propane was the industrial sector at 30 percent and the remaining 14 percent of propane was consumed by the commercial and transportation sectors respectively (see Propane Consumption by Sector pie chart above).

Propane Transportation Growth Rates

In 2010, the transportation sector consumed the least amount of total propane at approximately three percent. However, during 1990 to 2010, propane consumption in the transportation sector had the greatest annual growth rate among all sectors (see Figure 4).

Figure 4

In Missouri, there has been an increased use of propane as a clean burning fuel for applications in material handling equipment, landscaping equipment, public transportation, and other fleet vehicles. While the total  propane consumption in the transportation sector may be modest, (approximately 11,285,714 gallons in 2010) it continues to grow as  a transportation fuel in Missouri.

Additional Information

Additional information on factors affecting propane demand, supply and prices is available online. During the winter heating season, the Division of Energy surveys propane retailers and reports price information in its bimonthly Missouri Energy Bulletins.