LPG stands for Liquefied Petroleum Gas - a mixture of light hydrocarbons that are gases at normal temperatures and pressures, but liquefy at moderate pressures or reduced temperatures. LPG used as automotive fuel is referred to as LPG Autogas.

The main component gases of Autogas are propane (C3H8) and butane (C4H10). Autogas is colourless, odourless and heavier than air. A sulphur based chemical (ethyl mercaptan) is added to give it a smell, so that even a very small leak can be easily detected. LPG Autogas burns readily in air and has an energy content similar to petrol, which makes it an excellent fuel for automotive use.

LPG occurs naturally in crude oil and natural gas production fields and is also produced in the oil refining process. Australia has five sources of naturally occurring LPG sources - Bass Strait (1,050) kilotonnes (kt)), Cooper Basin in Central Australia (410 kt), North West Shelf (810 kt) Kwinana in Western Australia (330 kt) and Surat Basin in Queensland (16 kt).

Refinery production is from seven refineries, Bulwer Island (BP) and Lytton (Caltex) in Queensland, Clyde (Shell) and Kurnell (Caltex) in New South Wales, Altona (Exxon Mobil) and Geelong (Shell) in Melbourne and Kwinana (BP) in Western Australia.

Australia produces currently about 3,300 kt of LPG annually. Of these volumes, 80% is naturally occurring (i.e. extracted from oil and gas production) and 20% is extracted from crude oil in the refining process. Australia's production of LPG is projected to grow to 5,024 kt by 2020.

Autogas is typically at least 50 per cent cheaper than other automotive fuels. LPG Autogas prices move in a similar manner to petrol prices. The price fluctuations reflect the highly competitive nature of the industry.

LPG Autogas powered vehicles emit significantly fewer greenhouse gases and other pollutants than petrol-powered equivalents. LPG typically has around 20 per cent less ozone forming potential (a measure of the tendency to generate photochemical smog), between 10 and 15 per cent lower greenhouse gas emissions and only one fifth air toxics emissions.

LPG Autogas vehicles operate even more relatively cleanly when the engine is cold. Given that most urban-use vehicles are often used for very short journeys this means a significant reduction in “real world” emissions.

LPG Autogas is also much cleaner than diesel. The dirty black smoke that we see coming from diesel vehicles is particulates – a known cause of sickness and deaths. By replacing a diesel engine with an LPG Autogas-powered equivalent, over 90 percent of this particulate matter would be eliminated.

Last year the Federal Government recognized the environmental benefits of running motor vehicles on Autogas by announcing the fuel would remain excise-free until 2011.

Even after that date, excise will be gradually applied in annual increments of 2.5 cents per litre until it reaches a ceiling of 12.5 cents per litre in 2015.

In comparison, the current excise on petrol in 38.143 cents per litre.