PERC: Autogas maintains edge despite falling gas prices

High gasoline prices have helped alternative fuels such as propane autogas gain momentum over the last few years. But gas prices plummeted throughout the second half of 2014 and reached a four-year low by the end of the year, according to the Lundberg Survey.

In fact, the Lundberg Survey reports the average price of gas has dropped $1 since early May. Another source, AAA’s Daily Fuel Gauge Report, says the national average for gas was at $2.23 to start 2015.

So now that gas has shown to be more competitive to propane autogas on price, what effects will these new gas prices have on the still-growing autogas market in the United States? 

At least one autogas leader says the market should not feel any impact from lower gas prices.

“Falling prices for conventional fuels have no short-term effects on propane autogas sales, and even outside of pricing at the pump there are many factors that drive our success,” says Mike Taylor, director of autogas business development at the Propane Education & Research Council. “While decreasing prices for gasoline and diesel are generally good news for the U.S. economy, history unfortunately suggests it to be a short-term trend.”

Taylor references historical trends with crude oil prices to support his argument that propane will not be affected.

“Recent experiences show that whenever prices for crude oil go down, they eventually rise back up,” he says. “The price for propane autogas continues to follow those crude oil and conventional fuels, so at whatever levels, propane autogas continues to enjoy cost advantages of 30 to 50 percent over conventional fuels.”

Price is a key factor in the decision to invest in autogas, Taylor adds. But it’s just one factor, he says. There are other areas to consider that favor propane.

“Paying for any given asset from its purchase until its retirement, savvy fleet managers know there are many factors that have profound and lasting effects on their budgets and their fleets’ overall performance, efficiency and productivity,” Taylor says. “Propane autogas has proven to provide fleets of all types with the lowest [total cost of ownership] and the most acceptable [return on investment] among any fuel options.”

According to the latest figures from the U.S. Department of Energy’s Alternative Fuels Data Center, which calculates average fuel prices from a sampling of refueling stations, propane was at $3.08 nationally and gasoline at $3.34. Those propane prices, however, are based on its most recent report published in October 2014 and also combine propane prices at both primary stations (providing fuel specifically for vehicles) and secondary stations (which include fuel for non-vehicle uses).

According to Taylor, fleets fueling with propane generally pay about 30 percent less for their fuel than they would pay for gasoline. Propane pricing is generally about 50 percent lower than diesel pricing for fleets, Taylor adds.

“Higher prices for conventional fuels, coupled with federal incentives, provide even greater comparative advantages for propane autogas versus those fuels,” Taylor says.