Why is LPG cheaper than Petrol?

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Why is LPG cheaper than petrol?

LPG is an auto gas which is abundantly available and is also environmentally friendly fuel compared to
others. Apart from having many positive environmental benefits LPG auto gas is observed to be cheaper
than petrol and diesel. LPG price vary in different countries. The cost of LPG is not 50 percent cheaper
than that of petrol as it is assumed. On average, the LPG prices were about 33 percent cheaper than that
of petrol in 2009 at UK. The reasons why LPG might be cheaper than petrol are:

1. Production cost of LPG might vary in different countries based on their economy and
distribution of LPG fields at that location. Based on the manufacturing cost, the price of LPG is
also determined. LPG cost does not differ much with petrol in some countries like London and it
is also observed here that the increase in LPG and petrol prices is parallel.

2. The calorific value of LPG is lower than petrol and diesel. The number of miles per gallon of LPG
covered by a vehicle is comparatively lesser than that of petrol. It is observed that around 2/3rd
of a liter of LPG covers the distance same as that of covered by a liter of petrol.

3. The tax value imposed on LPG is also less than the other fuels in UK and hence LPG is probably

4. The freight charges of LPG to some countries might be more compared to that of others which
influences the cost of LPG in that particular country. For example, New Zealand pays higher
freight charges than that of Australia to get LPG imported to their countries. So LPG is cheaper
than petrol in Australia compared to New Zealand. This freight charge might influence the local
price of LPG.

5. Domestic production of LPG from natural gas plants as well as from oil refineries will show
minimal need to get LPG from other places. So the country with higher LPG production might
have cheaper prices for it than petrol. Petroleum products cannot be available except in certain
places where oil banks are present.

6. LPG can continue to maintain savings in its price as the demand for petrol is more than LPG at
several places and especially in China and India. The demand for other fuels is increasing rapidly
compared to that of LPG. This might affect the international LPG prices.

7. The LPG fields are extensively spread than the oil fields and hence the cost of LPG might be
lower due to nil freight charges. There are several LPG fields improved internationally, like the
Kupe field in New Zealand which can help to reduce the prices of LPG.

8. LPG might be cheaper than petrol in the areas where the political instability does not influence
the economy very much.

Depending on the distances we travel in the vehicle, the price of petrol and LPG will vary
accordingly. Small distances coverage will not make any difference between petrol and LPG. It
is also observed that supermarket discount voucher will show that petrol is cheaper than LPG.

Rock gas fuel card usage might give the usage of LPG cheaper, as their rates are lower than retail
LPG price. For high mileage vehicle, rock gas fuel card will be cheaper for LPG.

Author: Hari M

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