Can UPS Save With Propane-Fueled Delivery Trucks?

24/7 Wall St.

UPS truck
United Parcel Service Inc. (UPS) announced Wednesday morning that it will purchase 1,000 propane-fueled package delivery trucks and install 50 propane fueling stations at a cost of around $70 million. The new trucks will replace gasoline- and diesel-fueled vehicles now in use mostly in rural areas of Louisiana and Oklahoma.

UPS tested a fleet of 20 propane vehicles in Gainesville, Ga., over the past winter. The vehicles are made by Freightliner Custom Chassis, a division of German automaker Daimler. The engine is built by General Motors Co. (GM).

The company expects the fleet of 1,000 trucks to travel more than 25 million miles a year and save approximately 3.5 million gallons of gasoline and diesel fuel every year. But UPS may not save a lot of money.

Propane prices have risen to as much as $5 a gallon in parts of the United States this winter as the bitter cold has lifted demand for home heating. Last summer, propane was selling for as little as $1 a gallon in places.

The average price for a gallon of residential propane in the United States was about $3.48 on February 24, according to the U.S. Energy Information Administration. The average wholesale price was $1.84 a gallon. UPS likely will pay somewhere in between those two numbers. Export demand for propane is also rising, so that could factor into UPS’s price as well.

Shares of UPS were inactive in premarket trading Wednesday, having closed Tuesday at $96.98, in a 52-week range of $81.95 to $105.37.

Filed under: Services Tagged: GM, UPS

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