Propane: The Other Natural Gas Market
With apologies to J.J. Cale...
If you wanna hang out, you've got to take her out / Propane
If you wanna get down, down on the ground / Propane
Up in price, up in price, up in price / Propane
Organic chemistry, for those who never had the pleasure, has certain Tinkertoy qualities. You can keep linking carbon atoms in chains and rings and hanging things off the side to produce larger and more interesting molecules. As is the case elsewhere in life, however, the simplest things are the most important.
The natural gas we're most familiar with is at least 96% methane, which has one carbon atom. The gasoline you pour into your Bronto SUV is a mixture centered on octane, which has eight carbon atoms. The petrochemical industry relies on the lighter, smaller molecules with two to four carbons: ethane, propane and butane, and their close derivatives. As these oscillate between their gas and liquid states, depending on temperature and pressure, and are extracted from raw natural gas, they are called natural gas liquids, or NGLs. Of these, propane is the most important economically and serves as the principal price-discovery mechanism.
Carry the TorchThe price of NGLs is normally quite volatile, and both producers and consumers have developed hedging strategies to protect themselves as best as they can.
|A Tiger in the Tank
|Source: CRB Infotech|
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