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Forecasts for liquefied petroleum gas (LPG) shipping profits remain positive, according to an article posted by London-based consultancy firm Drewry Shipping Consultants Ltd. The company also states that demand for LPG shipping has remained strong as oil prices have fallen, proving wrong fears that lower prices would lead to LPG being substituted as an industrial fuel.

Data from Drewry's LPG Forecaster suggests consumption of LPG has risen steadily despite fluctuations in the price of Brent crude. Drewry expects the trend to continue, since "60% of global consumption is residential whose demand is largely inelastic to oil price change". Drewry also estimates that industrial consumers are generally unable to switch to other fuels. "The remainder is largely consumed by petrochemical production and Drewry estimates that only 20 percent of the sector's capacity is capable of switching away from LPG fuel."

While demand has grown, oil prices have fallen - helping to reduce shipping costs. Drewry estimates that "lower fourth quarter bunker costs contributed an 11% boost to LPG TCE [time charter equivalent] earnings for very large gas carriers (VLGCs) on the Arabian Gulf-Japan route compared to the previous quarter". During this period, Drewry estimates that average freight rates declined to $85 per tonne, a fall of 26 percent. Coastal routes in North West Europe and Eastern Europe reportedly saw earnings rise 22 percent in the same period despite a reduction in freight rates.

Shresth Sharma, senior gas shipping analyst at Drewry, argued that fears that falling oil prices would hurt the LPG shipping industry were unfounded, saying: "The implication is that LPG shipping has everything to gain from lower oil prices, despite unfounded fears that this may reduce cargo demand and so damage sector earnings."

Sharma also predicted that low bunker costs will continue for the remainder of the year.

"While we do not anticipate VLGC freight rates reaching the highs of last year given the large number of vessels lined up for delivery, we expect bunker costs to remain low through 2015 which will help support LPG shipping earnings," he said.