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Converting your vehicle to LPG – Still Economical

Posted by jessica | 13 March 2012

With the increase in LPG prices many people are wondering if it is still worthwhile to convert?  Well here is your answer supplied by leading motoring associations.  Contact us & let us tell you how much you could be saving!!


IS converting your vehicle to LPG still an
economically viable option?

Advertiser’s MICHAEL MILNES reports.


MOTORISTS who thought LPG was the saviour to the ever-climbing price of petrol must now be wondering if their conversion was the right move.

 Industry experts say LPG converts have been hit with a “triple whammy”, with the price of gas surging more than 40 per cent in the past five months.

Since August 2006, the Federal Government has paid motorists a $2000 rebate for installing an LPG system on their cars or $1000 for buying a new car that ran on LPG.

Unlike other fuels, LPG had no excise or taxes on it so its price remained fairly stable for years. But that all changed in December last year when the Federal Government introduced a 2.5c-a-litre excise on LPG.

Furthermore, gas-using motorists can expect to pay 20 per cent more than today’s prices by the time the full 12.5c excise plus GST is in place by 2015.

In the past week, LPG prices in Adelaide have been as high as 89.9c – a far cry from an average price of only 59.7c a litre in November last year.

The price of LPG is set by the Saudis on the first business day of the month and remains at that price for the rest of the month.

LPG Australia chief executive Michael Carmody says the excise is terrible for motorists.

“The crazy thing about this is on one hand you have got a government who just spent the last four to five years providing rebates and encouraging people to get their vehicles converted across to LPG and in the next breath they are applying a tax to the product, ” Mr Carmody says.

“LPG is seen as one of the absolute key transition (less polluting and more sustainable) fuels within Australia. We have got abundant supplies in terms of energy security … and it pumps out 15 per cent less pollution out of the exhaust. We should be encouraging everyone to get on to it.”

Mr Carmody says harsh winter weather in the northern hemisphere is driving up the demand, and price, for LPG along with the introduction of the excise.

“In addition to that over the last couple of months, you have had Woolworths and Coles conducting a price war on their petrol, diesel and LPG products where we have seen anything up to 10c a litre discounting at the bowser,” Mr Carmody says.

“What has happened is all of a sudden the price war has stopped, we have been hit by the Saudi contract price rise – and now the Government’s excise price with GST is on top of that, the poor old consumer has been hit with an absolute triple whammy.”

Motorists can expect the high prices to stay until the end of this month and into April when the demand in the northern hemisphere drops as they move into their spring.

Mr Carmody does warn, however, there could be similar volatility with LPG prices in 2013.

“I know it’s tough for our LPG consumers who look at the price board and see the price going up, but the autogas consumer is getting a great deal out there.”

The $2000 rebate for converting vehicles to LPG will be dropped to $1250 until June 30 this year before dropping to $1000 until it ends on June 30, 2014. A rebate of $2000 will still be paid until June 30, 2014, on new vehicles if LPG is fitted before its first registration.

In the past, gas conversions on cars would mean a loss of power and reduced fuel economy by up to 30 per cent. But that has all changed, SA Auto Gas owner Andy Sutton says.

“LPG actually has an octane rating of 103, higher than any petrol,” he says.

“The gas systems we use these days are identical in operation to the petrol injection systems, driveability and economy is better (than the old gas systems) … people are not aware that you can buy a system that drives identical to petrol,” he says.

“On gas-injected LPG vehicles, you actually gain around about 5 per cent power. Economy within 10 per cent of petrol injection is realistic. It depends on how you drive it.

“You are getting more bang for your buck. You get the same result out of 80c worth of LPG as you get out of $1.50 worth of petrol.”

Mr Sutton says when the $2000 rebate kicked in, he was doing two to three gas installations a day but now that the government rebate has dropped, they are down to about four a month.

“It’s dropped off incredibly,” he says. “It’s lucky our business doesn’t rely on LPG only. If it did, we would be like a lot of the small gas guys and shut the doors.”

Mr Sutton estimates about a third of gas-conversion companies that were around at the rebate’s peak have closed.

With the average cost of an LPG installation at $4000 to $4500, less the $1250 rebate, he says a motorists using 100 litres of gas a week will have the system paid for in about a year. “It’s a no-brainer,” Mr Sutton says.

RAA senior analyst Chris West says motorists who have converted to LPG are still making savings.

He says ongoing tensions in the Middle East and the demand for energy in Asia – especially for LPG in Japan because of the Fukushima incident – are continuing to push the prices for all energy commodities higher.

“The Australian dollar strengthened throughout February and reduced the full impact of the increase, but motorists will still be hit with high pump prices,” he says.

In January 1991, the Federal Government deregulated the wholesale price of LPG. As an internationally traded commodity it is influenced by international prices and factors such as the the Australian dollar.

Australian LPG producers also trade it at international prices in metric tonnes and US dollars.

LPG is a clean, green environmentally friendly alternative to other fossil fuels as it emits far fewer pollutants.