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:
- Royal Dutch Shell
- China Petroleum and Chemical Corporation
- 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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Propane Industry Trends for 2022? ›
The global propane market reached a volume of 164.3 Million Tons in 2021. Looking forward, IMARC Group expects the market to reach 212.8 Million Tons by 2027, exhibiting a CAGR of 4.10% during 2022-2027.What is the projected future of propane? ›
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.What is the demand for propane? ›
The propane market was valued at over 150 million ton in 2021 and is projected to register a CAGR greater than 4% during the forecast period 2022-2027. Owing to the COVID-19 pandemic, the demand for propane from end-user industries, including commercial, transportation, and industry, had declined drastically.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.Is propane a fuel for the future? ›
Industry experts suggest that approximately 5 million gallons of renewable propane will be used in 2019, and that up to 18 million gallons is a possibility by 2021 if future renewable propane productions capabilities are met. Propane is referred to as autogas when it's used as an on-road engine fuel.Is the propane industry growing? ›
The propane market in the United States is expected to register a CAGR of more than 5% during the forecast period (2022-2027). The COVID-19 pandemic had a negligible effect on the market. Additionally, the market is projected to grow steadily during the forecast period.
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.How big is the propane industry? ›
Industry Insights. The global propane market size was estimated at 195.3 million tons in 2016. Worldwide increasing energy demand created high consumption in industrial and commercial end-use is a key growth driving factor for the industry. Propane is a coherent part of globally rising commercial end-use industry.Why are propane prices climbing? ›
Contributing to the current price increase is that during the early days of the pandemic, fuel prices plummeted because of decreased demand. The industry—and Wall Street—is still trying to recover. That's why, rather than increase supply, there are some who want to keep prices high by keeping supplies tight.Why is propane gas high? ›
Supply And Demand
That's because the supply is high enough to meet demand. However, if there isn't enough supply to meet demand, then the price is going to increase. That's because a lot of people are trying to get their hands on propane. To mitigate demand and make its supply last longer, companies will raise prices.
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.Where does US get its propane? ›
Propane is produced from crude oil refining and natural gas processing. Propane production is generally consistent throughout the year because it results from natural gas processing and crude oil refining. Most of U.S. propane production is from natural gas processing.What are the disadvantages of propane? ›
The biggest disadvantage to a propane heating system is keeping up with tank maintenance – or not. If you own the tank, you're responsible for regular inspections, and you have to fix the problem if there's leaks or corrosion. You might even eventually have to replace the tank.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.Is propane bad for climate? ›
BUSTED! Propane is not safe for the environment. Propane is a liquid when stored, and when released into the air, it vaporizes and dissipates with no ozone-harming effects. This means it cannot contaminate groundwater, drinking water, marine ecosystems or sensitive habitat if released.How much propane is left in the world? ›
How to Tell How Much Propane Is Left for Your Gas Grill - CHOW TipWho is the biggest propane company in the United States? ›
The largest propane company in the United States is Amerigas. With over two million customers and propane services in all 50 states (with over 1,200 outlets) you should have an Amerigas outlet near you.Is propane considered a petroleum product? ›
Propane is one of a group of liquefied petroleum gases (LP gases). The others include butane, propylene, butadiene, butylene, isobutylene, and mixtures thereof. Propane has lower volumetric energy density, but higher gravimetric energy density and burns more cleanly than gasoline and coal.How much propane is left in the world? ›
How to Tell How Much Propane Is Left for Your Gas Grill - CHOW TipIs propane environmentally friendly? ›
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.
What is the current price of propane in North Carolina? ›
North Carolina Residential Propane Price is at a current level of 3.521, down from 3.528 last week and up from 2.989 one year ago.How does propane compare to natural gas? ›
One cubic foot of propane = 2,516 BTUs compared to one cubic foot of natural gas = 1,030 BTUs. Propane contains more than twice the energy of natural gas. In one hour, a 100,000 BTU natural gas furnace burns around 97 cubic feet while a propane furnace burns only 40 cubic feet in an hour.How long until we run out of propane? ›
We will still have gas and coal left by the time oil runs out in 2052. But if we increase gas production to fill the energy gap left by oil, then those reserves will only give us an additional eight years, taking us to 2060. We should realize that burning gas impacts on global warming because of CO2 emission.Does propane go bad? ›
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.How long will propane last? ›
As a rule of thumb, one tank of propane will typically last between 18-20 hours if you're grilling on a medium-sized grill. Whereas larger grills can burn through 20-pounds of propane in as little as 10 hours. On average, you'll use one or two pounds of fuel per meal if you use a medium-sized grill on high heat.