The history of propane begins with the industrial revolution and the proliferation of the automobile. In 1910, a Pittsburgh motor-car owner complained to chemist Dr. Walter Snelling that the gallon of gasoline he had purchased was half a gallon by the time he got home. He thought the government should look into why consumers were being cheated because the gasoline was evaporating at a rapid and expensive rate. Dr. Snelling took up the challenge and discovered that the evaporating gases were propane, butane, and other hydrocarbons. The general term for these gases is LP-gas. Over the years LP-gas has become synonymous with propane. Using coils from an old hot water heater and other miscellaneous pieces of laboratory equipment, Dr. Snelling built a still that could separate the gasoline into its liquid and gaseous components.

About this same time, according to a tradition, a wealthy family who had become accustomed to piped natural gas for their cooking needs, moved to a remote location along the eastern seaboard of the United States where piped natural gas was not available. A friend of the family, who worked in the oil refining industry, "bottled" some liquefied petroleum gas (LP-gas), adapted a pressure regulator to a valve on the bottle and piped the 'gas from a bottle' into the kitchen of his wealthy friend's new home. Thus was born bottled gas. Whether or not this story is true, propane was quickly becoming recognized as an available and marketable, portable gas source which acted very similar to natural gas or "city" gas, making it an easy sell to modernize rural homes beyond the natural gas piping.

By 1912, propane gas was cooking food at home. The first car powered by propane ran in 1913. By 1915 propane was being used in torches to cut through metal. However, the motorist's demand for gasoline grew at such an enormous rate during these early years, that the demand of other hydrocarbons, including propane, could not keep up and were considered little more than nuisance by-products. Millions of gallons were literally "flared" (burned off) simply to be disposed of.

In 1927, the total sales of propane in the U.S. were just over one million gallons, and after World War II the propane gas annual sales increased to more than 15 billion gallons. When Dr. Snelling sold his propane patent to Frank Phillips, the founder of Phillips Petroleum Company, his price was $50,000. Today, propane gas is an $8 billion dollar industry in the United States alone, and it is still growing.

By the 1930’s, the Compressed Gas Association (CGA) established and proposed a set of recommendations to the National Fire Protection Association (NFPA). In 1932, the first pamphlet of standards (No. 58) was adopted for publication.
Today, about 30% of the propane produced is extracted with and refined from crude oil. The other 70% is processed from natural gas. Propane is normally found trapped in pockets with either crude oil or natural gas.

The process of refining crude oil, similar to Dr. Snelling's still but on a grander scale, produces many different gaseous hydrocarbons, including propane. These different gases are captured under pressure and slowly cooled. Depending on their boiling point, each of the gases will condense into a liquid, one at a time, as the temperature drops (in a condensing tower) below the boiling point of each gas.

Propane is also extracted from natural gas; in several different ways. Natural gas straight from a well is referred to as "wet" gas. This means that the gas is a mixture of hydrocarbon gases and in, some cases, liquids. The mixture includes propane, methane, butane, and other natural gasolines. Even though the sources and the processes are quite different, there is almost no difference in the quality and composition of the end product.