Why is liquid gas so cheap?

Gasoline is expensive and diesel is nowhere near as cheap as it used to be. LPG has also risen in price, but is still significantly cheaper per liter than other fuels. Why actually?

LPG stands for “Liquefied Petroleum Gas”. This is a type of fuel that consists of a mixture of hydrocarbons, usually propane and butane, that are compressed under pressure into liquid form.

Liquefied gas cheap?

The price of LPG can vary depending on various factors, as can the price of other fuels such as petrol and diesel. There are a few reasons why gas is often cheaper compared to other fuels. Please note that the consumption of an LPG car is usually higher.

LPG is a byproduct of petroleum production and refining. It is obtained in the same process that leads to the production of gasoline and diesel. Because the gas is a by-product, production costs are generally lower than the main products, gasoline and diesel.

Excise taxes

The price of gasoline consists of 41 percent from production, 8 percent from margin, 17 percent from VAT and 34 percent from excise tax. With diesel, you pay a little less excise tax and the production consumes a little more of the price, and the margin is also a little higher. For LPG, the excise tax rate is only 16 percent of the price. The percentage of the price spent on production and VAT is the same as gasoline. The gas station operator’s margin for liquid gas, on the other hand, is significantly higher: 26 percent.

According to United Consumers, you pay excise tax of 0.789 euros per liter for gasoline and 0.516 euros for diesel. You pay excise tax of 0.345 euros per kilo on liquid gas; one kilo corresponds to around 2 liters.

In short: Liquefied gas is not only cheap because there is little excise tax on it, it also costs little money to produce because it is a by-product. What keeps the price low is the competition in the market. Of course, price always remains a game of supply and demand. Read here how quickly you can pay off an LPG system.