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# **5. Reflections on increasing the use of LPG**

For households for whom LPG is the cleanest form of household energy (that is, households who do not have access to natural gas and who would not consider electricity for cooking and heating), affordability is the most important determinant of LPG. The findings of this study enable one measure of affordability to be constructed: the percentage of total household spending needed to purchase 1 kg of LPG. Table 9 compares national selection rates and quantities consumed in the light of that measure of affordability. The table also compares three prices: local retail prices in U.S. dollars, the average of residential LPG prices during the survey period in the United States, and the average of free-on-board (FOB) prices of LPG during the survey period. Comparison of retail prices is not straightforward because transport costs vary from country to country as do taxes and subsidies. Although U.S. retail prices serve as suitable reference points particularly for Guatemala, Brazil, Mexico, and Peru, they are shown for all countries because the U.S. LPG market has no subsidies or price control and is characterized by large economies of scale and high efficiency. FOB prices are taken from a geographically relevant market for each country and represent prices before the costs of transport, bottling, distribution, and retailing as well as taxes are added.

Table 9: Affordability of LPG

|**Country**|**Share of**<br>**households**<br>**using LPG (%)**|**Quantity per**<br>**user household**<br>**(kg/month)**|**Retail pr**<br>**(U**<br>**Local**<sup>**a**</sup>|**ice of LPG**<br>**S$/kg)**<br>**USA**<sup>**b**</sup>|**FOB price of**<br>**LPG**<br>**(US$/kg) **|**1 kg of LPG/total**<br>**household**<br>**expenditure (%)**|
|---|---|---|---|---|---|---|
|**Guatemala**|51|12|1.11|0.78|0.47|0.2|
|**India**|24|11|0.47|0.62|0.39|0.6|
|**Indonesia**|7.1|12|0.41|0.65|0.39|0.4|
|**Kenya**|4.0|9.7|1.63|0.72|0.48|1.0|
|**Pakistan**|7.9|8.1|0.71|0.62|0.39|0.5|
|**Sri Lanka**|26|7.6|0.75|0.79|0.52|0.4|
|**Albania**<sup>**c**</sup>|71|12|1.51|1.08|0.88|0.2|
|**Brazil**<sup>**c**</sup>|88|8.4|1.39|0.99|0.53|0.2|
|**Mexico**<sup>**c,d**</sup>|80|29|0.86|1.07|0.69|0.1|
|**Peru**<sup>**c**</sup>|63|9.4|1.08|0.78|0.36|0.2|

_Source:_ U.S. EIA (2011) for U.S. prices, Reuters for FOB prices in the North Sea and Saudi Aramco contract prices, and authors’ calculations. _Notes_ : FOB = free on board. FOB prices are taken from Mont Belvieu propane prices in Texas, United States for Guatemala, Brazil, Mexico and Peru; the average of propane and butane prices from the North Sea for Albania; and the average of propane and butane Saudi Aramco contract prices for India, Indonesia, Kenya, Pakistan, and Sri Lanka.

a. Local retail prices of LPG converted to U.S. dollars using the market exchange rate at the time of the survey.

b. National average retail prices of LPG for residential consumers in the United States at the time of the survey. c. Quantities are estimated using national average prices.

d. The shares of households using LPG are based on the statistics for those using LPG as the primary cooking fuel.

Comparison of local and international prices provides clear evidence of price subsidies in India, Indonesia, and Mexico. The combination of subsidies and relatively high income made LPG most ―affordable‖ in Mexico, although a greater share of households was using LPG in Brazil. What the low ratio of price to income seemed to increase in Mexico was the average quantity purchased, which was nearly triple the average of the remaining nine countries. The