Operating automobiles on compressed natural gas instead of gasoline is not a new idea. In many of the worlds major cities, buses and taxis have converted to natural gas. The problem has always been the lack of sufficient refuelling stations. Is it a chicken and egg thing? Does there need to be more fulling points before more people convert to natural gas or do more people have to convert first to push companies into building an adequate system of refuelling stations. Personally, I think there has to be more refulling stations first; but I will get to that in a moment. First let’s look at why it is a good idea.
I came across some good data in the investment news letter $treet Authority First let’s look at this graph
As the author of the news letter, Nathan Slaughter, points out
A barrel of oil contains about six times the raw energy content of a thousand cubic feet (Mcf) of natural gas. So all things being equal, with oil prices about $99 per barrel, natural gas should fetch about one-sixth as much, or $16.50 per Mcf.
But thanks to horizontal drilling and fracking technologies, the United States is now awash in accessible, cleaner-burning natural-gas resources. And the resulting flood of natural gas has created a surplus, causing prices to collapse.
Right now, natural gas prices are currently languishing at $3.80 per Mcf. Multiply by six, and you see that it costs less than $25 to get an equivalent amount of energy from natural gas as you get from a barrel of oil. So on an energy-equivalent basis, natural gas is roughly one-fourth the cost of oil.
So, although at today’s price of natural gas, the equivalent of a gallon of gasoline would be about 75% cheaper, the gas producers are feeling a squeeze on their profits and some companies are cutting back on drilling and development of natural gas until demand brings prices up to the point where it makes economic sense to continue expanding production.
Surely there is a price for natural gas that would satisfy both the consumers and the producers. Instead of reducing vehicle full cost 75% maybe it would be 50 or 40 or 30% cheaper for the consumer. Still good.
The benefits to our nation would be many. If there were a nation-wide system of refuelling and most car and trucks and buses were converted to run on natural gas. all vehicle users would save on fuel cost and thus have more disposable income to spend or save. The environment, especially in the big cities that suffer from smog, would benefit from near zero pollution from burning natural gas. The transportation element in the cost of all products would go down. Oil consumption in the United States would drop dramatically and we could stop sending so many of our dollars to unfriendly nations in the Middle-East and South America. US oil producers could become exporters and we would benefit by reducing our trade imbalance.
But how to get the supply, including refuelling stations, and demand to meet? Current in some major cities fleet owners of cars and buses are converting to natural gas. This is demand pushing supply and it is progressing very slowly. I personally would like to see the suppliers pushing demand. In an ideal free market system the suppliers (Big Gas and Big Oil are essentially the same players) would put on massive promotional campaigns on the benefits of converting to natural gas. They should put up their risk capital to install refuelling stations ahead of demand; starting with the major cities and then eventually along the Interstate highways and eventually through out all of America. They may even need to set up low-cost financing to incentivize people to make the change. The last thing we should want is for our nanny state central government to get into the act of subsidizing the producers and the consumers. in this age of crony capitalism, I would be surprised if Big Gas/Big Oil are aren’t waiting for government to step-in. I am surprised that some politician isn’t already promoting such an idea.
Converting to natural gas should be a win-win for everybody. Will it happen? I don’t know.
Well, that’s what I’m thinking. What are your thoughts?