The U.S. Energy Information Administration’s (EIA’s) 2018 "Winter Fuels Outlook" predicts a slight increase in winter heating expenditures this year. This is assuming that temperatures remain similar to last year with the same number of heating degrees days, a measurement of the energy needed to heat a building.

A 20% annual price increase for No. 2 heating oil is anticipated, while propane prices are expected to remain flat. With a sliding price differential, it is time to re-evaluate the value of propane.

The Promise of Propane

Propane is a liquefied petroleum gas (LPG) that is colorless, tasteless, odorless and non-toxic. It is not a greenhouse gas and in the 1990 Clean Air Act it was approved as a clean fuel that, when substituted for other fuels such as gasoline and fuel oil, has a positive impact on air quality. For safety reasons it is odorized with additives and 1 lb of ethyl mercaptan, 1 lb of thiophane or 1 lb of amyl mercaptan is added to every 10,000 gallons of LPG.

LPG is fractionally distilled from lighter and heavier hydrocarbons when refining crude oil or natural gas. The fluid has a rapid expansion ratio of 270:1. It expands quickly when vaporized and burns cleaner than most other petroleum fuels. Although several propane grades are available, consumer-grade propane - HD5 - is the most widely sold and distributed grade in the U.S., and it is also the purest form, with a guaranteed minimum propane concertation of 90% and a maximum propylene concentration of 5%.

Propane can be quantified by either mass or volume. While gas grills and small tanks are filled on a mass unit basis, as is the case for a standard 20 lb tank, residential deliveries are almost always quantified by volume.

Volumetric unit measurements of propane pose complications and are generally less accurate because the density of propane fluctuates with respect to temperature. The industry standard base reference point for liquid propane is at 60° F, where there is a density of 4.24 lb per gallon. However, a fluctuation of as little as 20° F can have a dramatic effect on propane density. The following chart from The Engineering ToolBox best illustrates this non-linear relationship:

Source: The Engineering ToolBox

The vapor pressure of propane is also temperature dependent. Liquid propane is stored at its vapor pressure and the pressure within the tank is governed by ambient temperature and not by the amount of liquid propane present. Overfilling a propane tank can pose safety concerns, as thermal expansion could lead to tank failure. For these reasons, an 80% fill rule is followed. This provides a buffer volume and the accompanying propane vapors can be compressed to accommodate thermal expansion of the fluid.

The thermodynamic behavior of propane and its non-linear negative temperature coefficient also give rise to inaccurate readings in the holding tank. Liquid propane is measured by a float gauge; since density is a function of ambient temperature, the gauge will read lower at lower temperatures. However, this does not affect the amount of propane in the holding tank, just the gauged meter reading.

Delivery trucks compensate for the non-linear behavior of the fluid. An automatic temperature compensator adjusts volumetric measurements based on the temperature of the fluid flowing through the meter.

Current propane delivery methods are finicky at best. Regulations require the volumetric compensation device to be re-calibrated and it is adjusted based on the temperature of the liquid at the time of calibration. The holding tank also requires routine inspections.

Heating Value

Propane is often a more expensive fuel, although the spot price is highly variable. As of November 26, the EIA posted the U.S. average residential propane price at $2.424 per gallon versus $3.274 per gallon for No. 2 heating oil. When normalizing per unit energy, propane is still the more expensive fuel but the margins are decreasing:

Propane $2.424 / 0.091333 million Btu per gallon = $26.540 per million Btu

Heating oil $3.274 / 0.1385 million BTU per gallon = $23.639 per million Btu

Monthly Heating Oil and Propane Prices (October - March) | Source: U.S. Energy Information Administration

Conclusion

Propane is a non-toxic fuel and when substituted for other fuel sources like gasoline and No. 2 fuel oil it has a positive impact on air quality. It is primarily used as a home heating fuel in suburban and rural areas where natural gas is not available.

Shrinking cost margins with respect to No. 2 fuel oil support the use of propane as a viable fuel source in residential markets, although unit cost is influenced by geographic location.