Monday, August 29, 2005

The Forgotten Alternative Fuel
The Automobile section of the Sunday NY Times featured an article on the benefits of natural gas-powered cars, including being awarded coveted carpool lane status along with hybrids. Unfortunately, the Times neglected to mention that increasing the share of natural gas used in transportation--miniscule now--would inevitably result in gas imports in the form of LNG on a vastly larger scale than presently contemplated, and with even greater pushback on proposed facilities. As I read the article, it reminded me of a different "alternative fuel" for cars, one that is hardly ever mentioned: LPG.

The last time gasoline was this expensive, in the 1970s, there was a big rush to convert cars to the only practical alternative available at the time, liquefied petroleum gas (LPG), mostly propane with a bit of butane. While we don't see a similar response here today, this article from The Economist describes the growing enthusiasm for LPG cars in the UK, with nearly 125,000 such vehicles on the road. Because of tax policy, the difference in price between petrol and LPG in Britain is huge: $7.00/gal vs. $3.00/gal., at current exchange rates. Even if switching to LPG didn't improve the car's gas mileage, the conversion would pay out in a couple of years, under typical usage.

By comparison, there are 350,000 LPG cars on the road in the US, and growth has been much slower. While the pricing advantage vs. gasoline is much narrower here, I see several advantages for LPG that merit giving it more consideration:
  • It burns more cleanly than reformulated gasoline, resulting in lower vehicle emissions of all types.
  • Because LPG is a byproduct of both oil refining and natural gas processing, its supply base is more robust than that of most other alternative fuels.
  • Converting existing cars to LPG is less difficult than converting them to natural gas, and the onboard storage tank is smaller and lighter, because of LPG's higher density and lower pressure.
  • Existing infrastructure for refueling, though not as ubiquitous as for gasoline, is widespread.
  • The infrastructure for importing LPG is much less expensive and complex than that for LNG, and could likely be expanded with less opposition than LNG terminals are experiencing.

Even though US natural gas production has stagnated, global gas production is increasing, and LPG producing will increase with it, since propane and butane, the main constituents of LPG, must be separated out of natural gas to meet pipeline gas specifications. So, at least in theory, the future supply prospects for LPG look good. Increasing LPG use in cars and reserving natural gas for home heating, industry and power generation looks like a sensible approach, with US gas imports set to grow for the foreseeable future.

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