Monday, November 25, 2013

Propane provides stunning fuel savings

Commercial truck and bus fleets in the United States are becoming keenly interested in running their vehicles on liquid propane (LPG), as this column reported back in March. That's because propane prices are substantially below those for gasoline or diesel, or even for compressed natural gas (CNG). Moreover, LPG provides substantial savings in maintenance costs and up to a 50-percent reduction in CO2 emissions. Now, the question is, will LPG catch on with everyday drivers and not just commercial fleets?

LPG, also known as autogas, can be unbelievably cheap – if you buy it in bulk. Anyone who fills up the tank for their barbeque grille, or heats their home with it, will tell you that it's as expensive as gasoline. But fleets that commit to buying in bulk can get a substantial discount.

"Today we're buying LPG at $1.14 a gallon and we get a 50-cent federal tax credit, so we're actually paying 64 cents a gallon. It's been a real winner for us," says Edgar Benning, the General Manager of the Mass Transportation Authority for the city of Flint, Michigan.

The city of Flint, which is struggling through hard economic times, is saving so much money on fuel that the LPG vehicles are actually paying for themselves. Benning says it costs the city 13 cents per mile to operate its vehicles on LPG versus 41 cents a mile using diesel fuel.

The interest in propane as a fuel is a direct result of the shale bonanza that is transforming the US energy sector. As recently as only five years ago, propane was largely produced from petroleum and its price was directly tied to the price of oil. Today, propane is largely a by-product of natural gas production. The US has such a surplus that it has become a net exporter, and in some areas there is such an abundance that producers are pumping it back into the ground. Read more here.

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