1. What is Propane

Propane is a kissing cousin of natural gas and petroleum. Propane is usually found mixed with natural gas and petroleum deposits in rocks deep underground. Propane is called a fossil fuel because it was formed millions of years ago from the remains of tiny sea animals and plants.

When the plants and animals died, they sank to the bottom of the oceans where they were buried by layers of sand and silt. Over the years, the layers became thousands of feet thick. The layers were subjected to enormous heat and pressure, changing the energy-rich remains into petroleum and natural gas deposits. Eventually, pockets of these fossil fuels became trapped in rock layers much as a wet household sponge holds water.

Propane is just one of the many fossil fuels that are included in the liquefied petroleum (LP) gas family. Because propane is the type of LP-gas most commonly used in the United States, “propane” and “LP-gas” are often used synonymously. The chemical formula for propane is C3H8.

Just as water can change its physical state and become a liquid or a gas (steam vapor), so can propane. Under normal atmospheric pressure and temperature, propane is a gas. Under moderate pressure and/or lower temperatures, however, propane changes into a liquid. And that’s the beauty of it.

Propane is easily stored as a liquid in pressurized tanks. (Think of the small tanks you see attached to a gas barbecue grill, for example.)

Propane takes up much less space in its liquid form. It is 270 times more compact in its liquid state than it is as a gas. A thousand gallon tank holding gaseous propane would provide a family enough cooking fuel for one week. A thousand gallon tank holding liquid propane would provide enough cooking fuel for almost ten years! Liquid propane instantly vaporizes into a gas when it is released from its tank to fuel propane gas appliances and equipment. Propane has been nicknamed the “portable gas” because it is easier to store and transport than natural gas.

Like its close cousin natural gas, propane is colorless and odorless. An odorant is added to propane (as it is to natural gas) to serve as a warning agent for escaping gas. And like all the fossil fuels—coal, natural gas, and petroleum–propane is a nonrenewable energy source.

History of Propane

Propane does not have a long history. It wasn’t discovered until 1912 when people were trying to find a way to store gasoline. The problem with gasoline was that it evaporated when stored under normal conditions.

Dr. Walter Snelling, directing a series of experiments for the U.S. Bureau of Mines, discovered that several evaporating gases could be changed into liquids and stored at moderate pressure. The most plentiful of these gases was propane. Dr. Snelling developed a way to “bottle” the wet (liquid) gas. One year later, the commercial propane industry began heating American homes.

2. Producing and Transporting Propane

Propane comes from natural gas and petroleum wells. Fifty-five percent of the propane used in the United States is extracted from raw natural gas. (Raw natural gas is natural gas that hasn’t been cleaned and processed yet.) Raw natural gas contains about 90 percent methane, five percent propane, and five percent other gases. The propane is separated from the other gases at a natural gas processing plant.

The remaining 45 percent is extracted from petroleum. Petroleum is separated into its various parts at a processing plant called a refinery.

Transporting Propane

How does propane get from natural gas processing plants or oil refineries to the consumer? Generally, propane first moves through underground pipelines to distribution terminals across the nation. Distribution terminals, which are operated by propane companies, function similarly to warehouses that store merchandise before shipping it to stores and shops. Sometimes, especially in the summer when less energy is needed for heating, propane is stored in large underground storage caverns.

After storage at distribution terminals, propane is transported via railroad tank cars, trucks, barges, and tanker ships to bulk plants. A bulk plant is where local propane dealers fill their small tank trucks.

People who use very little propane-backyard barbecue cooks, for example–must bring their propane cylinders to the dealer to be filled.

3. How Propane Is Used

Propane is used by homes, farms, business, and industry-and mostly for heating.

Homes. Propane is used mostly by homes in rural areas that do not have natural gas service. Propane appliances include ranges, ovens, space heaters, fireplaces, furnaces, water heaters, clothes dryers, and air conditioners. Millions of backyard cooks use gas (that’s propane gas) grills for cooking. And recreational vehicles (RV’s) usually have propane-fueled appliances, giving them a portable source of energy for cooking, hot water, and refrigeration.

Farms. Half of America’s farms use propane to meet their energy needs, too. Farmers use propane to dry crops, brood chickens, power tractors, and warm greenhouses.

Business. Business and commercial establishments–from grocery stores to laundromats–use propane for heating and cooking.

Industry. Certain industries find propane well-suited to their special needs. Metal workers use small propane tanks to fuel their cutting torches and other equipment. Portable propane heaters give construction and road workers warmth in cold weather. Propane heaters at construction sites are used to dry concrete, plaster, and fuel pitch. Propane also heats asphalt for highway construction and repairs. And because propane is a very low-pollution fuel, fork-lift trucks powered by propane can operate safely inside factories and warehouses.

The United States uses more propane gas than any other country in the world. Propane supplies one percent of our total energy needs and ranks as the seventh most important source of energy in the country today, just after hydroelectric power and biomass.

Nearly 90 percent of the propane used in this country is produced in the United States. The other 10 percent is imported from Canada, Venezuela, and Middle Eastern countries.

4. Propane–A Transportation Fuel Too

Did you know that propane has been used as a transportation fuel for more than half a century? Taxicab companies, government agencies, and school districts often use propane, instead of gasoline, to fuel their fleets of vehicles. Today about six percent of propane’s use is for transportation.

There are some interesting characteristics about propane that make it an ideal engine fuel. First, propane is clean-burning, much more so than gasoline. Propane leaves no lead, varnish, or carbon deposits that cause the premature wearing of pistons, rings, valves, and spark plugs. The engine stays clean, free of carbon and sludge. This means less maintenance and an extended engine life.

Also, propane is all fuel. It doesn’t require additives usually blended into some grades of gasoline. Even without additive boosters, propane’s octane rating of 110 is equal to and, in most cases, higher than available gasoline.

Propane-fueled engines produce less air pollution than gasoline engines. Carbon monoxide emissions from engines using propane are 50 percent to 92 percent lower than emissions from gasoline-fueled engines. Hydrocarbon emissions are 30 percent to 62 percent lower.

So why isn’t propane used as a transportation fuel more often? For one reason, it’s not as conveniently available as gasoline. Second, an automobile engine has to be adjusted to use propane fuel, and the cost of converting an engine to use propane is often prohibitive. Third, there is a slight drop in miles per gallon when propane is used to fuel vehicles.

What Influences Propane Prices?

Propane prices are subject to a number of influences, some are common to all petroleum products, and others are unique to propane. Because propane is portable, it can serve many different markets, from fueling barbecue grills to producing petrochemicals. The price of propane in these markets is influenced by many factors, including the prices of competing fuels in each market; the distance propane has to travel to reach a customer; and the volumes used by a customer. More specifically, propane prices are affected by:

Crude Oil and Natural Gas Prices – Although propane is produced from both crude oil refining and natural gas processing, its price is influenced mainly by the cost of crude oil. This is because propane competes mostly with crude oil-based fuels. – See figure to right

Supply/Demand Balance – Propane supply and demand issubject to changes in domestic production, weather, and inventory levels, among other factors. While propane production is not seasonal, residential demand is highly seasonal. This imbalance causes inventories to be built up during the summer months when consumption is low and for inventories to be drawn down during the winter months when consumption is much higher. When inventories of propane at the start of the winter heating season are low, chances increase that higher propane prices may occur during the winter season

Colder-than-normal weather can put extra pressure on propane prices during the high demand winter season because there are no readily available sources of increased supply except for imports. And imports may take several weeks to arrive, during which time larger-than-normal withdrawals from inventories may occur, sending prices upward. Cold weather early in the heating season can cause higher prices sooner rather than later, since early inventory withdrawals affect supply availability for the rest of the winter.

Proximity of Supply – Due to transportation costs, customers farthest from the major supply sources (the Gulf Coast and the Midwest) will generally pay higher prices for propane.

Markets Served – Propane demand comes from several different markets that exhibit distinct patterns in response to the seasons and other influences. Residential demand, for instance, depends on the weather, so prices tend to rise in the winter. The petrochemical sector is more flexible in its need for propane and tends to buy it during the spring and summer, when prices decline. If producers of petrochemicals should have to depart from this pattern for some reason, the coinciding demand could raise prices. And when prices rise unexpectedly, as they do sometimes in the winter, petrochemical producers pull back, helping to ease prices. Prices could also be driven up if agricultural sector demand for propane to dry crops remains high late into the fall, when residential demand begins to rise.

For current information on propane prices, supply, and demand, see the

Heating Oil and Propane Update section of the Energy Information Administration’s (EIA) web site.

Why do Propane Prices Spike

*Propane prices occasionally spike, increasing disproportionately beyond that expected from normal supply/demand fluctuations. The main cause appears to lie in the logistical difficulty of obtaining resupply during the peak heating season. Because propane is produced at a relatively steady rate year-round by refineries and gas processing plants, there is no ready source of incremental production when supplies run low. Propane wholesalers and retailers are forced to pay higher prices as propane markets are bid higher due to dwindling supply. Consequently, higher propane prices are simply passed on to consumers. Imports do not offer much cushion for unexpected demand increases or supply shortages due to the long travel time. On the other hand, when propane prices do spike, the petrochemical sector may cut back on its use, thus freeing up supplies for other uses.

For current information on propane prices, supply, and demand, see the Heating Oil and Propane Update section of the Energy Information Administration’s (EIA) web site.

*Source: U.S. Department of Energy’s Energy Information Administration web site

What is the G.A.R.C.F. charge on my invoice?
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 SchagrinGAS office.