Regional slant on LPG price volatility

LPG just isn't as cheap as it once was. As of December, it's moved up to 55 cents, according to Holden's Richard Marshall. Based on the RACV's average price for 91 RON unleaded, the gas costs about 40 per cent of the price charged for petrol.

So it's actually quite affordable. And while cars running on LPG are thirstier than the petrol equivalents, diesels are not 60 per cent more economical than petrol cars of otherwise the same specification. Usually new-car buyers pay a substantial premium for diesel-engined cars too -- and it's that premium that often discourages buyers from the diesel option. Why then do people complain about the cost of LPG rising? For that matter, is it rising faster than petrol anyway?

The RACV's pricing histories for petrol and LPG suggest otherwise, but LPG prices have recently risen unexpectedly, according to Marshall, Holden's Director of Energy, Environment and Technology.

"Of course the really big benefit of LPG is price," Marshall told media attending the launch of the mono-fuel LPG option for the Commodore. "On average, over [a] number of years, it typically sits at less than half the price of petrol. So you can actually achieve half the running costs of a petrol-powered car.

"Just in the last month, LPG has actually jumped by 15 cents a litre. This is primarily due to the increased demand from Europe. Our pricing is set on the Saudi-Aramco price. It's a global commodity, it's traded like any other energy product on world markets and we have an import price parity arrangement the same as we do with petrol.

"So that increased demand through the very cold winter they've just had is driving up demand... therefore the price has spiked a bit. We would expect, obviously, as winter conditions abate that demand will come down; we expect that price also to return to normal levels."

Part of the reason prices of LPG remain relatively stable in Australia -- notwithstanding the odd cold snap in other parts of the world or government imposing an excise where once there was none -- is the demand for LPG is far outweighed by the country's ability to supply its own domestic market.

"The good news for Australia is we have plenty of LPG," Marshall explained. "In the last few years we've been using about 1800 kilotons of LPG, but we've been producing about 2700 kilotons, so there's also a significant export opportunity here.

"With the increasing development of the north-west shelf, LPG is a by-product of that development, so the amount of LPG coming into the market is actually increasing quite rapidly -- a lot faster than even if we sold every Commodore as an LPG car, we couldn't possibly overtake that supply."

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