Daily Blog

Do You Realize? - The Inside Story of the Wholesale and Retail Propane Markets

In 2024, more than 9 billion gallons of propane were delivered to U.S. consumer markets, primarily for residential heating and cooking, with substantial volumes supporting the commercial, industrial, agricultural and transportation sectors. It is a physically complicated business because, unlike electricity and natural gas, which are delivered through wires and pipelines, respectively, the vast majority of the propane used by U.S. consumers is delivered by some combination of pipelines, rail cars and, ultimately, trucks. How does that complicated supply chain work in real life? In today’s RBN blog, we begin a detailed look at the U.S. propane market. 

In this blog series, we will discuss the U.S. side of the propane market, starting with the journey of propane molecules from the wellhead to the fractionator to the domestic consumer’s burner tip, including an introduction to the roles played by — and the interactions between — propane wholesalers and retailers. Later in this series, we'll discuss those roles and interactions in more detail, and also look at propane inventories and pricing.

From Wellhead to Burner Tip

The voyage of a propane molecule from the wellhead to the end user involves many steps. As shown in the left-most section of Figure 1 below — under the “Supply (Midstreamer/Refiner)” subhead — NGLs are entrained within the natural gas stream coming out of the wellhead, then separated at a natural gas processing plant (second icon from far left) which chills the gas until the liquids in the stream (including propane) liquefy and “fall out” of the stream. The resulting mix of NGLs, known as raw mix or Y-grade, is then piped to underground storage or NGL fractionators. In the fractionator, the liquids are heated and separated based on boiling point, yielding so-called “purity” NGLs including propane. (Raw mix sent to storage must also be fractionated before moving ahead to the next steps in the value chain.)

Though not shown in Figure 1, propane is also produced by refineries. There, most of the propane comes from the main atmospheric distillation unit. LPG and other refinery gases are separated in the first cut of crude oil; following some additional processing, propane is produced. Nearly all the propane produced from refineries enters the retail propane market.

Wholesale-to-Retail Propane Value Chain

Figure 1. Wholesale-to-Retail Propane Value Chain. Source: RBN 

Join Backstage Pass to Read Full Article

Learn More