Will the price of LPG increase as more motorists convert their vehicles?

It's a fair assumption to make.

After all, Oil Companies control the supply of LPG as well as Petrol and Diesel. They are naturally out to make profit. Governments derive vast income by taxing road fuels.

In UK 80% of the forecourt price of Petrol and Diesel is tax in one form or another. The Garage forecourt owner currently receives 3 to 6 pence per Litre as gross profit and the Oil Company gets the remainder (approx 14%) which isn't a lot, considering the investment they have to make to get it there for the customer.

When studying the viability of converting your vehicle to LPG, you'll doubtless consider these facts and suspect that as more and more LPG is used (sold) as road fuel, the price will increase.

In truth, this is inevitable. It will happen someday. (Petrol used to be pence per Gallon when it was only sold as cleaning fluid in the late 1800's. Over time it became a road fuel and the price escalated to todays levels).

The key to this riddle, the real question is just the same. How much TIME will it take for LPG to become expensive? It isn't IF LPG will become relatively expensive, but WHEN? Before we try to predict that, many current trends and market conditions must be considered.

1. The Government has 'frozen' fuel duty on LPG (and actually reduced it recently) to keep the price down. The current level of taxation will not increase until at least 2004. They have done this to encourage more vehicle users to convert to LPG in the hope that this will help to cut emissions.

The measure is sensible, responsible and will succeed
(A refreshing change for a Government measure! )

2. LPG has never been expensive to buy in relative terms because it it is seen by the producers as a 'by product' and frankly a bit of a nuisance. It costs money to get rid of it or store it. Much of it is burned and wasted (as seen on Oil and Gas platforms everywhere) and not enough is sold for other purposes (heating etc.) to make it viable. At present there is a huge 'glut' of LPG in the industry which keeps its price low and there is NO captive market for it (as there is for Petrol and Diesel).

3. There are 23 million cars on UK Roads and they mostly use Petrol and Diesel as a fuel. LPG powered cars only amount to some 30 to 40 thousand or so.

It'll take a little time for Go LPG! to convert the remaining 22,960,000 so for a good while LPG will remain in the minority!

The car manufacturers are beginning to produce dual fuel cars and vans, but sales will take time to build up, and only when every vehicle sold runs on LPG will this begin to fully filter down into the secondhand market (a car takes 10 yrs or so to get to the bottom of that).

To sum up, even if the manufacturers decided to make only LPG powered (or dual fuel) vehicles right now, it would take 5 yrs for them to gear up for full (unilateral) production. Then add the 10 yr average life cycle to allow the car to get to the 'banger' (or classic!) level. That's what it would take to change the fuel of the national fleet.

Now consider the level of taxation on LPG being frozen for that 3 yrs. Remember that up to now there has only been a small market for a 'waste' or 'by' product. Understand that LPG is a 'blue eyed boy' in the estimation of environmentalists (relatively speaking) and will have their backing. Politicians are forced to encourage its use to 'keep in with the Greens'. It looks like LPG will not increase in price (in real terms) significantly for a good while. Not for the next 3 yrs as an absolute minimum, and in reality somewhere inbetween 3 yrs and 15 yrs.

You may think "Well, it's not worth converting my car if the savings may only last 3 yrs".

Fair enough.

But think on these things first -

1. Most people only keep their car for less than 3yrs, all the way down the chain from new to 10 yrs old.

2. When you sell your car into the secondhand market you will get back some (if not all) of the money you invested in an LPG conversion.

3. If someone were to offer you up to 60% of your Petrol costs for the next 3 yrs (at least) with almost NO overall cost, wouldn't that be worth going for? Even if it were for only 3 yrs? ( 3 yrs savings could amount to a lot of money.....And what if the savings lasted much longer, say 10 yrs?)

4. What if you became the driver of the only type of vehicle that is allowed into inner city areas? (Which could happen very soon.)

5. Even if LPG prices do steadily creep up, the consumer may well see the savings preserved. Don't think for a minute that as Oil reserves run down the price of Petrol and Diesel will stay the same. It WON'T! As it runs out the price of both will escalate exponentially.

On the other hand, companies such as Go LPG! will be literally inundated with requests to convert Petrol and Diesel vehicles. You may have to wait months for a conversion date and conversion prices could rise as the equipment manufacturers see the opportunity for increased profit and sieze it with both hands.

6. Pressure and incentive to convert to LPG from both the Government and Green lobby will only increase as the benefits become apparent - One day soon a Petrol or Diesel user will be as unpopular as a smoker is today. (This analogy is a good one, because both 'habits' cost a lot of money for no real gain to the user at all, whilst other's environments are polluted by them).



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