Thread: Future availability of LPG

The reason why LPG was so cheap (all those years ago), was because it was a by product that had a very small market. As the demand increases, the price will increase.

This is a better question: "As diesel costs less to produce than ULP, why is it more expensive at the pumps?"
Also, I can hardly wait until the motor manufacturers produce ethanol only cars. It will be a boom time for the Queensland cane fields. They might not have enough cane available to produce their rum.

Originally Posted by Mick_Marsh

This is a better question: "As diesel costs less to produce than ULP, why is it more expensive at the pumps?"

I can't help on that one.

LPG had no excise for many years. A few years back it was introduced, commencing at 2.5c/litre, increasing by 2.5 cents per year until the set max of 12.5% was reached. I'm not sure if we've now reached the 12.5 cents/litre point.

Edit: it went to 10 cents on 1st July and will go to 12.5 cents next year.

See http://www.raa.com.au/motoring-and-r...ion/lpg-excise

Originally Posted by Mick_Marsh

This is a better question: "As diesel costs less to produce than ULP, why is it more expensive at the pumps?"

Because the sale price is not necessarily related to production price. It is related to the basic economic principle of supply and demand that determines price - and in the case of diesel the market is not just Australia but the global market - hence we have to be a price taker as the price is determined by Global supply and demand.

If the sale price was actually based on production costs, a top level Porshe would only cost as much as your favoured Dunnydore.

As far as LPG goes, for the major cities even with the full amount of excise the cost will always be around 50c or more a litre cheaper than petrol and diesel (unless govts get greedy) so there will always be a market.

Outside the cities it is a different deal. Out west recently, the cost of LPG was $1.22 and petrol was $1.60 - in the 101 that means the cost per km is about even because of the increased consumption on gas. So if you lived out there, why would you convert to gas.

Garry

Even with the rebate, I thought the same about the value of a conversion to our country brethren.

Originally Posted by Mick_Marsh

........This is a better question: "As diesel costs less to produce than ULP, why is it more expensive at the pumps?".......

And another good question, why, when the price of petrol at the pumps goes up and down like a whore's drawers, does the price of diesel not fluctuate to the same degree?

There are a number of notable usage drivers.

1. The new vehicles sold today (and of course over the last 5 years) are either tiny or diesel powered. The cars that I frequently converted in 2008 are now worn out and the replacement vehicles aren't being converted. New Commodore, Falcon and Camry sales are waay down. How many petrol V8 Land Rovers are left to convert? Even D3's are lots more difficult than the ol pushrod engines that stopped in 2003.

2. Excise and local price rises, the price rises until the demand is blunted and the price then drops until demand picks up again. I've seen so many cycles since I started LPG work in 1985 that I get the overall picture by now.

3. Supply. As local oil/gas production drops, there is less LPG available to push to price down. The clear leaders in local production were Victoria with Bass Strait reserves and SA with the Cooper Basin. They are dying and the fracking supplies are different in composition.

4. Shipping cost: One future driver of price will be the upgrade of the Panama Canal allowing Yankee oil products to be more competitive in Asia. Cheaper shipping will drive down local prices in the short term. Article here:
Asian car manufacturers may even produce factory LPG cars to capitalize on the price drop, seeing as Oz car manufacture is dead.

Panama Canal expansion to put more US LPG into Asian markets: Bernstein


Singapore (Platts)--7Oct2013/232 am EDT/632 GMT


The biggest beneficiary when the expanded Panama Canal opens for business in 18 months' time will be arbitrage flow of LPG from the US to Asia, according to a Bernstein Research report released late Friday.

The canal's expansion, when completed by 2015, will allow the passage of larger vessels, including very large gas carriers or VLGCs and LNG vessels, for the first time.

Sailing time for vessels from the East Coast of the US to the Asia-Pacific will be reduced to 25 days through the Panama Canal, versus 41 days currently going around Cape Horn and 43 days on the eastern route through the Suez Canal.....

My 5.7 litre Chev powered Landie on LPG costs almost exactly as much per klm as my Defender TD5.
My company car is a dedicated gas falcon & it goes like stink.
I like LPG, one thing often overlooked with the stuff is its safety in an accident. The tanks are very durable.
As far as availability goes, it will find its own level. I remember my taxi driving early days when there were 3 X 24 hour servo's in Melbourne. I doubt smaller town country Servo's would spend the money to remove tanks & bowsers, easier to keep them, they are low maintenance, and just sell at a higher price.

Originally Posted by sheerluck

And another good question, why, when the price of petrol at the pumps goes up and down like a whore's drawers, does the price of diesel not fluctuate to the same degree?

LPG is propane based, which is derived from oil reserves througyh 'cracking' the crude into useful components.
As most of the world's oil is produced out of the arab nations, oil price (and subsequent LPG price) fluctuates in line with the Saudi Aramco Oil index. This is what the Saudi Aramco contract price is for buyers of their product (a index which goes up and down with the season (summer / winter) and their production schedules.
Big gas suppliers in Australia have limited ability to store gas product, so are pretty much at the mercy of buying it irrespective of price, and passing costs onto the consumers. One initiative is the 'Cavern' under port Botany, which is managed by Elgas. It's a man made cavern under the water table which uses water pressure to maintain LPG in its liquid state. Pretty cool, I'd love to see it one day.

As for the Saudi aramco index, there is a link here and here.
So the saudi contract price is what the big suppliers are paying for the product, then they add distribution costs, their profit margin, then the retailer (caltex, BP etc) will add a cut as well.

There are ongoing projects to use LNG (natural gas) from coal seams within the country to provide stable supply of these products (much to the dislike of the greener ones amongst us). These should further help to alleviate reliance on external price influences.

Originally Posted by Mick_Marsh

Also, I can hardly wait until the motor manufacturers produce ethanol only cars. It will be a boom time for the Queensland cane fields. They might not have enough cane available to produce their rum.

E85 (85% ethanol) is in use in a lot of major cities, and it's use is gaining a lot of support. Issues are:
1)You burn twice as much ethanol than you would petrol (octane) to get the same power output.
2) Not all vehicles are compatible with the ethanol- can damage fuel systems, or fuel injectors just can't maintain the fuel flow.