Study quantifies propane’s impact: Will it help the industry?

At last, the U.S. government is seeing the (blue) light, as Washington is finally finding out what everyone in the propane industry has known for years: propane is an integral part of the U.S. economy.

State Employment and Value Chain Summary For Odorized Propane: 2002

A new study recently unveiled by the National Propane Gas Association and the Propane Education & Research Council details for the first time the important contribution of the American propane industry to the U.S. economy and job market.

The $40,000 study, part of NPGA’s $1.1 million capital awareness campaign, was conducted by Energy and Environmental Analysis Inc. It concluded that the domestic propane industry provides nearly $30 billion to the nation’s Gross Domestic Product (GDP) and is responsible for thousands of jobs in every region of the country.

“The main reason we did this was because it had never been done before,” says Robert Baylor, NPGA’s director of communications.

“The industry is over 100 years old, but we never had any hard data or statistics. Now we have proof to take to Capitol Hill that propane is a major industry in the United States.”

The study completed a “Value Chain” analysis of the U.S. propane industry, which quantifies the GDP contribution to each segment of the industry. Combined, the industry’s five major sectors – production, transportation, storage, wholesaling, and retail – contribute almost $30 billion per year to the U.S. economy.

The direct financial impact is $11.7 billion annually, with $5.1 billion coming from production and imports, $500 million from transportation and storage and $6.1 billion from retailing.

Indirect impacts, which include growth in other sectors of the economy that serve the propane industry, add an additional $18 billion annually.

Value Chain for Odorized Propane: 2002 (Millions of Dollars)

Perhaps most importantly, the study concludes that 83 percent of the direct economic value of the propane industry stays in the United States.

“The numbers were higher than we expected, especially concerning the net worth of the industry,” says Baylor.

Beyond its financial impact, the U.S. propane industry employs more than 56,000 workers. The retail sector accounts for the vast majority of these jobs; production, transportation, storage and wholesaling make up less than 20 percent combined.

Specifically, the states of Texas, California, North Carolina, Florida, Missouri, Louisiana, and New York have the highest number of propane employees.

The U.S. Bureau of Labor Statistics publishes employee counts for the U.S. oil and gas industry by sector, but has never specifically tracked the propane industry.

Energy and Environmental Analysis evaluated the government data by sector and estimated the percentage of employees in each sector that are working in the Natural Gas Liquids industry, Liquified Refinery Gases industry, the propane industry as a whole and the odorized propane industry. In sectors involving more than one petroleum product (like crude oil refining), employees were allocated to each product based on the percent of value contributed by each product in the sector.

“The employment numbers were great because we didn’t know what to expect from them,” says Baylor. “We never had a gauge before.”

“The many thousands of jobs created within the propane industry in turn fuel the growth of other American industries and create thousands more jobs in hundreds of U.S. manufacturing, service and agricultural businesses,” says Richard Roldan, president and CEO of NPGA.

“Businesses and workers in every corner of our nation feel the positive effects of our industry.”

The study analyzed production, price and end-use sales data from 2002, the latest year all elements were available.

Despite being three years old, the data proved fairly accurate.

“Given propane’s growth of about 1 percent per year, the numbers wouldn’t have changed that much from 2002 to 2005,” says Baylor.

He added that record-high crude oil prices aren’t a factor either, as propane is no worse off than any other petroleum based fuel.

PERC President Roy Willis notes that the study verifies that propane has fostered the growth of many business, agriculture, and consumer innovations and also offers inventive solutions to our nation’s future energy demands

“The information in this study provides a valuable snapshot of propane’s contributions to the nation’s economy,” he says.

“New advances in technology and new uses for propane in a variety of high-tech applications promise to expand the benefits of propane in all 50 states.”

The study seems to be a smashing success, but what can a propane retailer take from it, and, more importantly, how can they benefit from it?

“This study gives propane retailers an accurate picture of how their industry fits into the nation’s economy,” says Baylor.

“Retailers now know they fit into the big picture like they never have before.”

He says the Energy Information Administration is projecting propane prices to show a 20 percent growth over last year, which should add to the overall financial impact.

See chart for the overall results of the EEA value chain analysis by state. The chart on page 20 summarizes the EEA value chain analysis for odorized propane in the United States.

For a copy of the full study visit the National Propane Gas Association website at: www.npga.org.