WASHINGTON – While American energy firms have made major progress in exploiting new “unconventional” (mostly shale) oil, this way vastly increasing domestic production, we still import almost half of the 18 million barrels of oil that we consume every day. This means “exporting” billions of US dollars, every day, in order to pay for this precious fuel. It is a well-known fact that most of our oil is refined into transportation fuel necessary to power a gigantic US fleet of automobiles and trucks.
US produced natural gas
Beyond increased domestic production, can America find other ways to import less oil? Yes it can, by taking advantage of abundant, cheap (and much cleaner) US produced natural gas. Using hydraulic fracturing and horizontal drilling, US energy companies managed to vastly increase the production of American natural gas.
Increased supply means lower prices. As most of our natural gas is used for electric power generation and for heating, this new supply is great news for both industry and individual consumers who see stable or lower electricity prices.
CNG/LNG as transportation fuels
While this is wonderful, we can do much better. Natural gas, compressed or liquefied (CNG/LNG) can also be used as transportation fuel, this way replacing diesel or gasoline, much of it derived from expensive imported oil. The reason for switching is lower prices. LNG/CNG cost only about $ 1.70 per “gasoline-gallon equivalent”. And do keep in mind that this is not a new, experimental technology. This is old stuff.
The reason why America never adopted natural gas engines to power vehicles is that traditionally we used to have relatively cheap gasoline. Well, now all this has changed.
Gasoline and diesel are no longer cheap; while (thanks to hydraulic fracturing) now we have enormous amounts of domestic and really inexpensive natural gas. Hence the price difference between gasoline/diesel and natural gas.
How can we switch?
The problem in shifting from gasoline/diesel to CNG/LNG is that the US automotive industry has been slow in offering new products that run on natural gas. At the same time, America still lacks a reliable network of refueling stations offering LNG or CNG.
And here we have the classic “chicken or egg” dilemma. LNG/CNG refueling stations are quite expensive. Very few entrepreneurs are willing to build them without the assurance that there will be plenty of customers. By the same token, consumers will be reluctant to make the switch to LNG/CNG powered vehicles unless they believe that they can be easily refueled anywhere.
Well, there is a solution to the “chicken or egg” dilemma and challenge. As Bob Lukefahr and Balu Balagopal explain in a WSJ op-ed piece, (Forget Electric Cars. Natural Gas Is Powering Vehicles in Texas, September 27, 2014), major US auto manufacturers such as Ford are introducing new trucks with flex-fuel engines, meaning engines that can work with both, natural gas and diesel. Other types of engines now being offered work with a blend of the two fuels.
This should take care of the refueling problem until more stations will be built. If you run out of LNG and the next refueling station is still too far, you switch your engine to diesel. No problem.
As the two authors explain, it is clear that companies that operate medium-sized or heavy trucks will get the most out of this fuel conversion. They work with heavy commercial vehicles that are on the road most of the time and therefore consume a lot of fuel. Considering the price advantage of CNG/LNG over diesel, the upfront costs of any conversion/retrofit of an existing fleet of trucks will easily be recovered because of the significant savings due to lower fuel costs.
Converting heavy trucks
Of course, down the line the real targets are bigger and more expensive 18 wheelers. However, the cost of converting really heavy trucks to LNG/CNG is much higher. And there are other issues, such as training mechanics on how to maintain these different types of engines.
Given the lack of familiarity with natural gas-powered vehicles, in many instances the cost of maintaining them is higher than the cost of maintaing the old but well known diesel powered trucks.
Overtime, as more and more people master the still unfamiliar technology, this will change. But higher maintenance costs may induce fleet operators to wait a bit longer before embracing LNG/CNG.
In other words, the transition to LNG/CNG is still complicated. But, in the end, as industry adjusts its offerings to the new fuel reality, and as more companies will invest in LNG/CNG refueling stations, simple economics should favor a switch from diesel to natural gas to power heavy vehicles.
With flex-fuel vehicles there is no down side
All this of course assumes that the substantial price differential between natural gas and diesel will stay. If we can imagine a future in which oil prices will go down (and stay down) significantly, this way driving down the cost of diesel, then there will be no longer any advantage in powering your trucks with LNG/CNG.
However, if you purchased a flex-fuel vehicle, you are still OK. If diesel will become cheaper than natural gas, (this is possible, although unlikely), then you switch back to diesel, at no extra cost, because your vehicle works with both fuels.