Propane Autogas Supply and Demand Analysis

As the Autogas market develops, can propane supply keep up with demand? Forecasting the supply of this fuel requires a close look at three core issues:

  1. Current propane supply and demand
  2. The future impact of new consumer propane demand
  3. Future U.S. propane production capabilities

Propane supply has increased in recent years, and current supply is greater than demand. The U.S. was a net exporter of propane in 2009, excluding imports from Canada. Total demand for consumer grade propane has been gradually falling, and is now down about 20% from peak levels in 2000. Similarly, demand for propylene feedstock is significantly lower than at the turn of the century.

Existing propane supply and distribution networks were designed for a much larger market than exists today. The infrastructure is already in place to support significant new demand for both consumer grade propane and propylene. At the same time, improvements in propane appliance efficiency will significantly offset demand increases (e.g., the tankless water heater).

Currently, the majority of U.S. propane supply is derived from natural gas. In the future, this percentage is expected to increase alongside growth in total propane supply, as domestic natural gas production increases, supplying both the propane and propylene markets.

Propane supply CAN keep up with demand as the Autogas market develops.

“Despite the decline in U.S. demand, propane/propylene prices have remained closely linked to the international oil price and propane prices. This price relationship is likely to continue regardless of foreseeable increases or decreases in domestic demand for propane/propylene.”1

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1 According to the “Propane Supply Outlook” from ICF International, an independent energy and environmental consulting group

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