LPG, also known as autogas, can be unbelievably cheap – if you buy it in bulk. Anyone who fills up the tank for their barbeque grille, or heats their home with it, will tell you that it's as expensive as gasoline. But fleets that commit to buying in bulk can get a substantial discount.
"Today we're buying LPG at $1.14 a gallon and we get a 50-cent federal tax credit, so we're actually paying 64 cents a gallon. It's been a real winner for us," says Edgar Benning, the General Manager of the Mass Transportation Authority for the city of Flint, Michigan.
The city of Flint, which is struggling through hard economic times, is saving so much money on fuel that the LPG vehicles are actually paying for themselves. Benning says it costs the city 13 cents per mile to operate its vehicles on LPG versus 41 cents a mile using diesel fuel.
The interest in propane as a fuel is a direct result of the shale bonanza that is transforming the US energy sector. As recently as only five years ago, propane was largely produced from petroleum and its price was directly tied to the price of oil. Today, propane is largely a by-product of natural gas production. The US has such a surplus that it has become a net exporter, and in some areas there is such an abundance that producers are pumping it back into the ground.
Converting a commercial truck to run on LPG can easily add $10,000 to the cost of the vehicle. An LPG fueling station can cost $50,000. Those up-front costs can scare off fleet operators, but others have figured out a creative work-around.
Student Transportation of America, Inc. is a fleet operator that manages 10,000 school buses in 16 states and Ontario, Canada. Most of those buses run on gasoline or diesel, but Omaha, Nebraska now operates 435 school buses that run on LPG. The company pays about $1.40 per gallon for the propane, but that includes paying for the infrastructure costs, and is still less than half the cost of fueling those buses with diesel.
The company pays about $1.40 per gallon for the propane, but that includes paying for the infrastructure costs
"By the way, we can pass those savings on to the school district and they can put that money into the classrooms where it's needed," says Denis Gallagher, the CEO of Student Transportation of America, Inc.
The savings go beyond the lower cost of the fuel. LPG burns so clean that operators find they can stretch out their oil changes to every 7,000 miles, versus the 4,000 mile oil changes they need with diesel engines. Better still, an LPG engine only needs 6 quarts of oil in the crankcase versus 16 quarts in a diesel engine. Over the six years or so that a fleet typically keeps a truck or bus, this adds up to a substantial savings in maintenance costs. And then there's the environmental benefit.
"We spent over a year investigating all the different alternative fuels in the marketplace. Propane autogas came right to the top," says Abe Stephenson, the Fleet and Administrative Manager for the Dish Network, which operates 5,000 vehicles in its fleet and has converted 200 of them to run on LPG. He estimates those 200 vans have cut CO2 emissions by 12.5 million pounds, or the equivalent of 200,000 trees absorbing CO2.
The LPG sector is more of a mom and pop industry.
So far LPG only makes sense for fleets, which can buy in bulk and whose trucks return to the same yard every night where they can be refueled. There are simply not enough public LPG fueling stations (about 2,500 in the U.S.) to attract the general public to the fuel.
But that's because the propane industry is very fragmented. Unlike compressed natural gas (CNG), which has attracted the interest of big oil companies such as Exxon Mobil, the LPG sector is more of a mom and pop industry.
But with the price of the fuel so cheap, the substantial maintenance savings, and the opportunity to slash carbon dioxide emissions, can't someone figure out a way to make it attractive to run our cars on propane?