Propane is produced as a by-product of two other processes: natural gas processing and petroleum refining.

The processing of natural gas involves removal of butane, propane and large amounts of ethane from the raw gas, in order to prevent condensation of these volatiles in natural gas pipelines. Additionally, oil refineries produce some propane as a by-product of cracking petroleum into gasoline or heating oil.

The supply of propane cannot easily be adjusted to meet increased demand, because of the by-product nature of propane production. About 90% of U.S. propane is domestically produced.

The United States imports about 10% of the propane consumed each year, with about 70% of that coming from Canada via pipeline and rail. The remaining 30% of imported propane comes to the United States from other sources via ocean transport.

After it is produced, North American propane is stored in huge salt caverns located in Fort Saskatchewan, Alberta; Mont Belvieu, Texas and Conway, Kansas. These salt caverns were hollowed out in the 1940s, and they can store 80 million or more barrels of propane. When the propane is needed, most of it is shipped by pipelines to other areas of the Midwest, the North and the South, for use by customers. Propane is also shipped by barge and rail car to selected U.S. areas.