FAQ’s

Propane, a close relative of natural gas and petroleum, is typically found mixed with these fossil fuels in underground deposits. Formed millions of years ago from the remains of ancient sea animals and plants, propane is a fossil fuel extracted from natural gas and petroleum deposits. Propane is also part of the liquefied petroleum (LP) gas family and is known for its versatility. Under normal atmospheric conditions, it exists as a gas, but when subjected to moderate pressure or lower temperatures, it transforms into a liquid, making it easily storable in pressurized tanks.

Why propane is called the “portable gas”
Propane is often referred to as the “portable gas” because it’s easier to store and transport than natural gas. In its liquid state, propane is 270 times more compact than in its gaseous form. This compactness allows a large amount of energy to be stored in a small space, making it a convenient fuel for various applications. When released from its tank, liquid propane instantly vaporizes into a gas, ready to fuel appliances and equipment.

Propane’s safety and odor
Like natural gas, propane is colorless and odorless, but an odorant is added to serve as a warning for escaping gas. It’s important to note that propane, like all fossil fuels, is a nonrenewable energy source.

How propane was discovered and developed
Propane’s history is relatively short, with its discovery dating back to 1912 when efforts were being made to find a way to store gasoline. Dr. Walter Snelling, conducting experiments for the U.S. Bureau of Mines, identified propane as the most plentiful gas that could be liquefied and stored under moderate pressure. By 1913, the commercial propane industry began, making propane a popular choice for heating American homes.

Where propane comes from
Propane is extracted from natural gas and petroleum wells. Approximately 55% of the propane used in the United States is separated from raw natural gas at processing plants, while the remaining 45% is extracted from petroleum at refineries.

How propane reaches consumers
After production, propane travels through underground pipelines to distribution terminals across the country. These terminals function like warehouses, storing propane before it’s transported via railroad tank cars, trucks, barges, and ships to bulk plants, where local dealers fill smaller tanks for distribution. Smaller users, like those with propane grills, typically bring their cylinders to dealers for refilling.

Common uses of propane
Propane is a versatile energy source used in homes, farms, businesses, and industries, primarily for heating.

• Homes: Propane is often used in rural homes without natural gas service. Common propane appliances include ranges, ovens, space heaters, fireplaces, furnaces, water heaters, clothes dryers, and air conditioners. Propane is also popular for outdoor grills and recreational vehicles.
• Farms: Propane meets about half of America’s farm energy needs, powering equipment like crop dryers, chicken brooders, tractors, and greenhouse heaters.
• Businesses: Commercial establishments use propane for heating and cooking, from grocery stores to laundromats.
• Industry: Propane is ideal for metalworking, construction site heating, and highway construction due to its clean-burning and efficient properties.

An important energy source in the U.S.
The United States is the largest consumer of propane, which supplies about 1% of the country’s total energy needs. Approximately 90% of the propane used domestically is produced in the U.S., with the remainder imported from countries like Canada, Venezuela, and those in the Middle East.

Propane has been utilized as a transportation fuel for over 50 years, particularly by taxicab companies, government agencies, and school districts. Though it accounts for only 6% of propane’s use, it offers significant benefits as a vehicle fuel.

The benefits of using propane as a vehicle fuel
Propane is a clean-burning fuel that leaves no lead, varnish, or carbon deposits, which can cause engine wear. This results in reduced maintenance and longer engine life. Propane’s high octane rating (110) and low pollution output make it an environmentally friendly alternative to gasoline.

Why propane isn’t used more often in vehicles
Propane is less commonly used as a transportation fuel due to its limited availability, the cost of converting engines to run on propane, and a slight reduction in fuel efficiency compared to gasoline. Despite these challenges, propane remains a viable alternative for specific fleet operations.

Propane prices are influenced by several factors, some common to all petroleum products and others unique to propane. Since propane is a portable fuel, it serves various markets, from barbecue grills to petrochemical production. The price of propane in these markets is affected by factors such as competing fuel prices, the distance propane must travel to reach customers, and the volume of propane used by customers.

How crude oil and natural gas prices affect propane prices
Although propane is produced from both crude oil refining and natural gas processing, its price is primarily influenced by the cost of crude oil. This is because propane competes mostly with fuels derived from crude oil.

How the supply and demand balance impact propane prices
The supply and demand balance for propane is influenced by factors like domestic production, weather, and inventory levels. While propane production is consistent throughout the year, residential demand peaks in the winter, creating a seasonal imbalance. This leads to inventory build-ups in the summer and drawdowns in the winter. Low propane inventories at the start of winter can increase the likelihood of higher prices during the heating season.

How colder-than-normal weather affect propane prices
Colder-than-normal weather can increase propane prices during the winter when demand is high. Since there are limited sources of additional supply, except for imports, cold weather early in the heating season can lead to higher prices. Early withdrawals from inventories reduce supply availability for the remainder of the winter, pushing prices upward.

Why  proximity to supply impacts propane prices
Transportation costs play a significant role in propane pricing. Customers located farther from major supply sources, such as the Gulf Coast and the Midwest, generally face higher propane prices due to these additional costs.

How markets served by propane affect its price
Propane demand varies across different markets, each with distinct seasonal patterns. Residential demand, for example, is weather-dependent, causing prices to rise in the winter. The petrochemical sector, which tends to buy propane in the spring and summer when prices are lower, is more flexible. If petrochemical producers purchase propane during the winter, when residential demand is high, it can drive prices up. Similarly, if the agricultural sector’s demand for propane to dry crops remains high into the fall, it can also contribute to higher prices when residential demand increases.

Current information on propane prices, supply, and demand
For the latest updates on propane prices, supply, and demand, visit the Heating Oil and Propane Update section of the Energy Information Administration’s (EIA) website.

Propane prices can occasionally spike, increasing disproportionately beyond what is expected from normal supply and demand fluctuations. The primary cause is the logistical challenge of obtaining resupply during the peak heating season. Propane is produced at a relatively steady rate year-round by refineries and gas processing plants, leaving no readily available source of incremental production when supplies run low. As a result, propane wholesalers and retailers are forced to pay higher prices as the market bids up due to dwindling supplies, and these higher costs are passed on to consumers.

Imports effect on propane prices during spikes
Imports provide limited relief during unexpected demand increases or supply shortages because of the long travel time required. However, when propane prices spike, the petrochemical sector may reduce its usage, thereby freeing up supplies for other consumers.

Current information on propane prices, supply, and demand
For the most up-to-date information on propane prices, supply, and demand, visit the Heating Oil and Propane Update section of the Energy Information Administration’s (EIA) website.

Source: U.S. Department of Energy’s Energy Information Administration website.

G.A.R.C.F., or Government Agency Regulatory Compliance Fee, is charged on all invoices for propane gas delivery. Over the years, as concern for environmental and safety issues has grown, there has been an ever-increasing number of local, state and federal regulations concerning energy production, storage and transport. While SchagrinGAS has always been committed to supplying our customers with the most cost-effective energy products in a way that meets or exceeds all safety and environmental standards, the cost of compliance with this myriad of regulations has continued to grow. Each new and existing regulatory standard carries with it an added burden of fees, inspections and paperwork. The training and reporting requirements continue to grow and expand, as does our involvement with federal, state and local public safety agencies to coordinate emergency response and hazardous materials handling programs. We find that we are unable to absorb these additional obligations into our regular energy acquisition, storage and delivery costs, and so an itemized charge for Government Agency Regulatory Compliance will appear on your invoice. The primary agencies affecting this fee include the U.S. Environmental Protection Agency (EPA), U.S. Department of Transportation (DOT), U.S. Occupational Safety and Health Administration (OSHA) and the Department of Natural Resources and Environmental Control (DNREC).

If you have further questions, please contact your local Schagrin Home Comfort Products office.