Liquefied petroleum gas (LPG) is a term describing a group of hydrocarbon-based gases derived from crude oil and or natural gas. Natural gas purification produces about 55 percent of all LPG, while crude oil refining produces about 45 percent.

LPG is mostly propane, butane or a mix of the two. It also includes ethane, ethylene, propylene, butylene, isobutene and isobutylene; these are used primarily as chemical feedstocks rather than fuel.

LPG becomes a liquid at normal pressure and a temperature of -42° C, or at normal temperatures under a pressure of about eight atmospheres (standard units equivalent to ordinary atmospheric pressure at sea level and 0 degrees centigrade).

Separating the economic impact of LPG is problematic because it is derived from both oil and natural gas. A report commissioned by the propane industry estimated propane added $3.8 billion to the Texas economy in 2002.

Texas is the nation’s largest producer and consumer of LPG.


In 1910, Dr. Walter Snelling, a chemist with the U.S. Bureau of Mines, discovered that propane was a component of liquefied gas. Soon afterward, he discovered a means to store and transport propane and butane. Snelling received a patent for LPG in 1913, which he then sold to Frank Phillips, founder of Phillips Petroleum Company.

Initially, LPG was used to fuel metal-cutting torches, but by 1927, manufacturers were making gas cooking ranges fueled by LPG. Soon after World War II, propane was used as a transportation fuel in buses and cars.


LPG, primarily propane, is widely used as a fuel for heating and cooking in rural America and other areas where natural gas lines are unavailable. Its transportability and easy storage have boosted its popularity. Although relatively few urban residences depend upon large propane tanks for heating and cooking, smaller tanks for outdoor grills are extremely common throughout the nation.

Propane also is used to generate electricity through microturbines and combined heat and power (CHP) technology. Microturbines are very small turbines intended to generate electricity for homes or commercial establishments, as well as for vehicles such as hybrid buses; they are still in the research and design stage. CHP, also known as cogeneration, produces electricity as well as heat for homes and businesses from a single fuel source.

While only 0.1 percent of LPG in 2005 was used for transportation, propane was nevertheless the most common alternative transportation fuel in the U.S., used by public transportation fleets as well as many state and federal agency vehicles. Propane has a lower energy output than gasoline, producing 84,000 British thermal units (Btu) per gallon, or about 74 percent of gasoline’s energy potential. The Texas Department of Transportation (TxDOT), which has the largest vehicle fleet in Texas state government, had 2,938 LPG-fueled vehicles in 2006, representing 28.5 percent of its fleet.

LPG also ranks third in the U.S., behind gasoline and petroleum products, as a chemical feedstock


Because LPG is a byproduct of oil and gas, the amount available is directly tied to the amount of oil and gas available. Texas’ crude oil reserves in 2006 represented almost one-fourth or 23.3 percent of total proven U.S. reserves. Natural Gas reserves in Texas represented an even higher proportion of total reserve than did oil.

Costs and Benefits

While propane is produced from both crude oil refining and natural gas processing, its price is more influenced by the cost of crude oil because propane competes mostly with oil-based fuels.

Weather, inventory levels and production all help determine LPG prices. As of January 8, 2007, residential propane cost $1.99 per gallon, while wholesale propane cost 96 cents per gallon. By March 17, 2008, the cost of residential propane had risen to $2.60 per gallon, while the wholesale price climbed to $1.63.

Environmental Impact

LPG is a non-renewable fuel source, as is the natural gas and crude oil from which it is produced. LPG is a cleaner alternative to many fuels, but its combustion does produce pollutants. These include particulate matter, sulfur dioxide, nitrogen oxides, nitrous oxide, carbon monoxide, carbon dioxide, methane and non-methane total organic carbon.

LPG is a cleaner alternative to many fuels.

LPG vehicles emit around a third less reactive organic gas, which reacts with other pollutants in sunlight to create ozone, and about 50 percent less of the vapors that create smog, than do gasoline vehicles. LPG vehicles also release 20 percent less nitrogen oxide and 60 percent less carbon monoxide than gasoline vehicles. Finally, LPG contributes very little to acid rain because of its low sulfur content.

Again, since LPG is a byproduct of oil and natural gas production, its water consumption and quality implications are similar to those of oil and gas.

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