Over the past few years, there has been a dramatic increase in energy consumption because of rapid industrialization and urbanization. The rising demand for energy has propelled the need for liquid petroleum gas (LPG), which is perceived to be a cleaner energy source than other hydrocarbon fuel sources.
Moreover, the ever-increasing shortage of traditional fuels has increased investment in unconventional fuel sources such as shale gas, which is propelling the Global LPG Market at a CAGR of 4 percent for the 2013-2018 period.
Increasing LPG-Focused Government Initiatives
Some of the biggest adopters of liquid petroleum gas usage in vehicles are various governments worldwide. In order to reduce emissions from local vehicles, many governments have announced incentives and support for LPG-based vehicles. For instance, the US Department of Energy has introduced a federal law and policy for LPG that covers alternative fuel tax exemption.
The policy deems alternative fuels to be non-taxable with regard to federal fuel taxes under the Internal Revenue Service. Also, the Government of Hong Kong announced the LPG Vehicle Scheme in its 1999 policy that includes the provision of incentives in 2000 for the replacement of diesel taxis with LPG taxis. Thus, support from governments across the globe drives the demand for LPG globally.
Some Goverments Facing Difficulties in Switching
Unfortunately, not all governments can afford to make the switch to liquid petroleum gas. The processing and conversion of LPG is a capital-intensive process that can pose a serious challenge to the Global LPG market during the forecast period.
Refinery processing is a costly process because it requires a high level of expertise, technological advancement, and strict safety measures to be set up in plants. In addition, the safety measures for LPG are complex, costly, and time-consuming. For instance, in a refinery or a gas plant LPG must be stored in a pressure vessel with pressure relief valves, so that it can vent LPG to the atmosphere when subjected to exterior heating or fire.
Additionally, LPG vessels should be designed and manufactured according to industry standards and codes. In the US, the code is governed by the American Society of Mechanical Engineers. Therefore, the capital-intensive process can pose a challenge for the Global LPG market during the forecast period.
Residential Sector to the Rescue
Fortunately for LPG vendors, the largest proportion of the demand isn’t from governments, it’s from the Residential sector, owing to the growing population and urbanization in many developing countries. According to the UN Department of Economic and Social Affairs in 2011, it is expected that by 2030, 59 percent of the overall population will reside in urban areas, which is likely to directly drive the demand for LPG for heating and cooking purposes.
Another reason for the rising demand for LPG is the increasing production of LPG from different sources (refinery, associated gas, and non-associated gas). The production of LPG is likely to increase due to the expected high demand in the coming years. Thus, with the increasing demand from residential customers, the Global LPG market is expected to witness rapid growth.
