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Page added on May 26, 2012

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Is Natural Gas a Deflation Catalyst?

Business

We have a ton of it sitting in the ground waiting to be consumed, the price is right (super cheap) and even T Boone Pickens loves it; so why aren’t we using more natural gas?

Over the last 2 years or so I have been examining alternative energy scenarios that would help solve our thirst for crude oil and gasoline, which not only drives both of those prices higher, but makes the U.S. dependent on foreign countries, who in turn capitalize and grow stronger on our weakness.  Many of these oil producing nations do have our best interests in mind.

70% of our crude oil consumption is driven (pun intended) by our transportation needs, ground transport accounts for a large part of that.

What’s interesting to me is that even though diesel is “less refined” than traditional gasoline, it is more expensive.  What’s worse is that the average tractor trailer gets about 5 MPG (That’s 1/3rd the MPG of a 12 cylinder Lamborghini).

Our interstates and the trucks that travel along its twists and turns are the primary circulatory system for getting goods and services to North Americans.  But since the average tractor trailer gets 5MPG and with diesel averaging over $4.15 per gallon, much of that cost is added into many of our consumables; everything from food and drink to clothing and even trash.

According to the Wall Street Journal, Waste Management (WM) passed $170 million in fuel costs back to the customer in 2011 alone.  To keep costs down, 80% of the vehicles they purchase over the next 5 years will be powered by natural gas.

The biggest issue with natural gas is not the engines or conversions, it’s the infrastructure.  When was the last time you saw a “natural gas station” while driving up and down America’s highways

But if large transport companies were to use their advanced logistical prowess to setup key refueling stations where needed and plot out truck routes so that minimal infrastructure was needed, we could be there sooner than later and perhaps see more stable, if not cheaper goods at our stores.  (This is already underway to an extent)

Waste management says that Nat gas vehicles may cost $30k more, but will save at least $27k per year.  My thinking is that if a truck has a 10 year life span, the company would save a minimum of $270,000.00 per truck. Waste management currently operates 1,400 CNG (compressed natural gas) trucks in N America, which equates to a savings of $378 million over 10 years on those trucks alone.  There are thousands of trucks in the total fleet.

Scott Perry, a V.P. at Ryder noted that “The economics favoring natural gas are overwhelming” and  Frito-Lay is also moving to Nat gas transport.

While a conversion to Nat gas has been difficult in the past, we may have the perfect storm of price, technology and politics to propel this initiative to wide adoption.

Zacks.com



8 Comments on "Is Natural Gas a Deflation Catalyst?"

  1. BillT on Sat, 26th May 2012 10:13 am 

    Natural gas is, pardon the pun, a huge bubble, soon to be popped by reality. No massive changes coming, sorry, except many bankruptcies, by all the fraking companies, is on the way. Zacks is another dreamer…

  2. Kenz300 on Sat, 26th May 2012 1:43 pm 

    Many long haul trucking companies are already converting to LNG. FedEx, UPS and others are moving forward with a mix of LNG, CNG and electric delivery vehicles.

    Ford, GM and Chrysler are now selling CNG fueled trucks and Honda sells a CNG fueled car.

    More companies are looking to diversify the fuels that their fleets use. The transition has begun. It is time to end the oil monopoly on transportation fuels.

  3. DC on Sat, 26th May 2012 8:39 pm 

    Yea, another dreamer. Natgas prices will stay low so long as no one is useing it to any degree. If NG started to really take off as a veh fuel, its price would rapidly escalate to parity with gas-o-lines. Thats how the cartel operates. Nat gas is actually a good fit for city vehicles, taxis and such, but for amerikas JIT system of hauling toxic plastic trash to wall-mart..forget it. That lifeblood this goof talks about is whats poisoning N.A.

    Hauling salty crud like fritos around, will not be a priority once fuel really b/c scarce, no matter how there vans are powered. Unless they use bikes or horse drawn wagons haha

  4. Kenz300 on Sun, 27th May 2012 1:37 pm 

    Quote — ” According to the Wall Street Journal, Waste Management (WM) passed $170 million in fuel costs back to the customer in 2011 alone. To keep costs down, 80% of the vehicles they purchase over the next 5 years will be powered by natural gas.”
    ———————–

    Businesses are making the transition to LNG, CNG and electric delivery vehicles.

  5. Max Reid on Mon, 28th May 2012 12:15 am 

    All they have to do is setup LNG/CNG fuelling station in their own depots and also allow the public to use it and earn money and also reduce their fuel costs. It will be a win win for every one.

    Slowly USPS, Fedex, UPS and all other transport related companies will run a large natgas station network.

  6. James on Mon, 28th May 2012 1:19 am 

    Natural gas will be cheap for the short term. However, as more people start to use it, it will become more expensive. Remember back in the 70s-80s when we started to use Nat. Gas for transportation, the price to heat your home went through the roof? This will happen again only maybe worse.

  7. BillT on Mon, 28th May 2012 3:28 am 

    Cheap natural gas will NOT last long enough for fueling stations to be set up, wait and see. The bubble will burst and the price will be higher than gasoline for the same energy content.

    Just because some corporation sees a way to make it work for them does NOT mean that it will be made available to you. After all, there are huge liabilities in fuel management and sales and they don’t have that with in-house use. Lawyers will get rich off of the natural gas bubble, you won’t.

  8. SOS on Mon, 28th May 2012 3:30 pm 

    The amount of resistance to the NG situation is a good example of peak politics at work. NG has a lot of enemies. Coal, oil, nuclear and enviromentalists are all banded together against it. The left uses peak politics=peak oil to control political power. If prices rise and supplies contract it will be as much about politics and competition as anything else. There is no shortage, only problems with production and distribution that arise from the hysteria of peak politics.

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