LP Gas

Expectations examined for propane pricing, market growth

ICF International’s Mike Sloan

Mike Sloan, principal at ICF International, shared his research-based perspective on propane pricing and markets during an educational session at the National Propane Gas Association’s (NPGA) Southeastern Convention & International Propane Expo, which took place April 11-13 in Atlanta.

Sloan stressed that international markets will increasingly impact the price of U.S. propane because the domestic and international markets are now linked.

“Winter propane prices will be impacted by what happens in Europe,” Sloan said. “A cold winter in Europe drives prices higher in the United States. A warm winter in Europe holds down prices.”

Sloan said an increase in U.S. exports will lead to lower average propane prices in the U.S. Don’t expect to see the prices available from a couple of years ago, he said, but the lower prices should benefit some propane markets.

Propane autogas may be an exception, though. At least for the moment.

“The economics of converting to propane are not as favorable as they have been,” Sloan said. “Probably the biggest factor in that market right now is the decrease in gasoline and diesel prices. Fleet managers are less [motivated] to convert. They saved 30 percent on their budgets without doing anything.”

Still, Sloan expects autogas to deliver gallon growth over the next five years. According to Sloan, between 12,000 and 13,000 propane vehicles were added to the road in 2014. Sloan expects that number to increase to 30,000 by 2020.

Overall, Sloan expects propane gallons to grow by 6 percent between 2014 and 2020. He expects the growth despite an expectation that a number of traditional propane markets will remain relatively flat.

“We’re expecting real growth in consumer demand for propane for the next five years,” Sloan said. “That would be 500 to 600 million gallons of new consumer propane demand.”

The residential market is among the traditional markets that will be slow to grow. In fact, it might retract.

“It’s not a growth market yet,” Sloan said. “We’re expecting a modest decline nationally in residential consumption. It is at a much slower decline than we’ve been watching the last few years and it’s driven primarily by improvements in efficiencies.”