Discover how to buy propane stocks as well as considerations when investing in the propane industry in Canada. Plus, three popular propane stocks to look into.
When the market is in turmoil, many investors turn to commodities. One lesser-known commodity is propane, sometimes called liquid petroleum gas (LPG). Here’s what you need to know about investing in propane stocks, why the price of LPG and propane can suddenly rise and whether it’s better to buy oil, gas or propane.
How to invest in propane stocks
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Invest in propane stocks
Investing in propane stocks means you’ll buy shares in companies that produce and sell propane and LPG.
Pros
Avoid fund management fees when you own individual stocks directly
Control your investment. Buy and sell stocks when you want.
Choose stocks according to your own investment goals and personal values
Cons
Individual stock investments provide less exposure to the market than funds
Individual stock investments provide less protection from market fluctuations than funds
Exchange traded funds (ETFs) can be a fantastic way to diversify your investment by spreading it across many different companies. As of the time of writing, there aren’t any ETFs that focus solely on propane stocks. You’ll need to look at energy-focused ETFs that invest in a range of fuels including oil, petroleum, propane and renewable energy.
Pros
Get exposure to a wide range of energy stocks
Lower fees than mutual funds
No need to research and pick individual propane stocks
Cons
Hard to invest solely in propane as most energy companies deal in a range of carbon fuels
Less control over your investment than individual stocks investments
Superior Plus Corp. is an energy distribution business that operates through 2 segments: US Propane Distribution and Canadian Propane Distribution.
The company distributes and sells propane, heating oil, other liquid fuels as well as propane-consuming equipment. Additionally, it rents, installs, maintains and repairs propane and heating oil equipment.
UGI Corporation distributes, stores, transports and markets energy products and related services in the United States and internationally. The company operates through 4 segments: AmeriGas Propane, UGI International, Midstream & Marketing and UGI Utilities.
UGI distributes and sells propane and liquefied petroleum gases (LPG) to residential, commercial and industrial customers. It also operates power-generating stations and provides logistics, storage and other services to third-party LPG distributors.
Headquartered in Texas, Energy Transfer LP owns and operates natural gas transportation pipelines, natural gas storage facilities and processing plants. It also sells natural gas to industrial end-users, electric utilities companies, independent power plants and local distribution companies.
Additionally, Energy Transfer manages coal and natural resources properties, sells standing timber and leases coal-related infrastructure facilities.
If you’re looking to invest in a clean source of fuel, then consider the advantages that propane has over gas, petroleum and diesel:
Propane is cleaner than gas, petrol or diesel as it produces less carbon dioxide when burned.
Propane isn’t harmful when inhaled and doesn’t emit chemical waste like sulphur dioxide, nitrogen oxides or methane.
Propane is not harmful to the soil, groundwater, freshwater or sea water as it evaporates into a nontoxic vapour.
It’s hard to argue that propane is a truly “green” fuel, because it’s produced as a byproduct of processing gas and petroleum. Renewable energy sources like solar power, wind power and hydropower are considerably more environmentally friendly.
What is LPG?
LPG (liquid petroleum gas) is a byproduct of processing natural gas and refining oil. Propane is sometimes called LPG. However, LPG is actually an umbrella term for several gases including propane, butane, propylene, butadiene, butylene and isobutylene.
Propane, the main type of LPG, is normally compressed and stored as a liquid. It’s nontoxic, virtually odourless and colourless, but an odour can be added to make it easier to detect. Propane is similar to butane but can boil and very low temperatures and is therefore used more often outdoors, whereas butane is often used indoors.
Propane is commonly used to heat homes in rural areas where it’s not possible to connect to gas lines. It’s also used in industrial processing and as fuel for machines and commercial vehicles. When used as fuel for transportation, it’s sometimes called propane autogas.
What causes the price of LPG and propane to rise and fall?
Many factors affect the cost of energy. But one of the main factors contributing to propane price increases is the rising cost of oil and gas. Because propane is a byproduct of oil and gas manufacturing, when oil and gas prices increase, so does the cost of propane.
Generally, higher supply drives down the price of resources. So, LPG and propane prices could go down if new resources are discovered, energy technology advances, laws benefitting oil and gas producers are passed or political tensions ease between countries that import and export energy resources.
What are LPG, propane and butane used for?
We’ve all occasionally heard about petroleum and oil prices rising, but propane isn’t usually in the news. It’s actually the 3rd most common transportation fuel in the world after gas and diesel. It also has many other uses including:
Making plastic
Running farm machinery including irrigation engines
Powering forklift trucks
Fueling fleet vehicles and buses (in this context, it’s called autogas)
Cutting metal and producing other materials
Heating homes and caravans
Powering electrical appliances
Heating water
Powering gas fireplaces and patio heaters
Bottom line
When the stock market is volatile, investors tend to see commodities like propane stocks as a safe investment. But the energy sector can be volatile, which makes it difficult to predict how propane stock prices will change.
Carefully research any investment before you buy in, and compare brokers to find one that offers the type of investments you want with fees and account requirements that work for you.
Frequently asked questions about propane stocks
Yes. Any money earned on investments—including propane stocks—is considered investment income that must be reported on your tax return. In Canada, you’re only taxed on half of your investment income. The tax rate depends on your total income from all sources in a given tax year (federal and provincial/territorial tax rates differ). Learn more in our stock trading tax guide.
When the supply of oil changes, which could happen due to political events, environmental movements, technological advancements and more, the price of oil and related commodities will also change. But it can be tough to predict how and when these changes will occur.
Diversifying your energy investments can help protect against unfavourable stock price movements. One way to diversify is to invest in exchange traded funds (ETF) that track the energy sector by holding stocks in many companies that deal in oil, gas and propane.
Yes. Propane is in high demand, because it’s used in many industrial applications including plastic production. It’s likely that the demand for propane will continue, and maybe even increase, in the future as cleaner fuels like LPG and propane become more widely used to power vehicles.
Propane is non-toxic and contains less carbon than other fossil fuels like coal and natural gas, so it burns more cleanly and is less harmful to the environment. In the United States, propane has been recognized as an alternative fuel. The US Department of Energy has stated that propane does not pose a threat to soil, surface water or groundwater if spilled or leaked from a vehicle.
That being said, other sources of energy like solar power, hydropower and wind power are cleaner (assuming fossil fuels aren’t used to power any mechanisms related to generating these types of energy).
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
Stacie Hurst is an editor at Finder, specializing in loans, banking, investing and money transfers. She has a Bachelor of Arts in Psychology and Writing, and she has completed FP Canada Institute's Financial Management Course. Before working in the publishing industry, Stacie completed one year of law school in the United States. When not working, she can usually be found watching K-dramas or playing games with her friends and family. See full bio
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