Should We Export Abundant US Natural Gas? May Be, But It Would Be Better To Use It As Transportation Fuel – Economic Benefits For Truck Companies, Consumers And US Energy Security

By Paolo von Schirach

December 6, 2012

WASHINGTON – “US Gas Exports Clear Hurdle”. This is the headline of a front page WSJ story, (December 6, 2012). The article points out that a major review of the US gas industry ordered by the US Department of Energy concluded that there would be no harm in allowing excess US natural gas to be exported.

Gas for export

The opportunity to export natural gas that cannot be absorbed by American utilities and industries that use gas as feedstock, such chemicals and plastics, is great news for energy companies that now are dealing with over supply and low prices, the downside of the shale gas boom. Yes, while only a few years ago it was assumed that America was about to run out of gas, now, (thanks to shale gas and hydraulic fracturing technologies that allow companies to extract gas from vast reserves like the Marcellus shale), there is a glut likely to continue for many years, given huge reserves.

Hence the idea of exporting what we cannot use at home. Of course, exporting natural gas is not that easy. Industry will have to build expensive LNG terminals (about $ 5 billion a piece) that will liquefy gas and load it on tankers, so that it can be delivered to its final destination in Europe or Asia. But, even factoring in these huge capital costs, exporting relatively cheap US natural gas to an energy starved world accustomed to pay a premium could be great business.

Gas as transportation fuel

That said, it is incredible that the WSJ story does not make even the slightest reference to potential new and substantial domestic market for US natural gas.

As T. Boone Pickens keeps telling us, the market is motor vehicles. Natural gas, compressed (CNG) or liquefied (LNG), can and should be used as transportation fuel. Even though this switch would require buying new trucks and cars, retrofitting production lines and building CNG refueling stations across America, it makes sense to go through all this trouble because natural gas is much cheaper than diesel or gasoline, much of it made from imported oil.

Heavy trucks

From a purely economic vantage point, companies that own and operate large numbers of heavy trucks should be first in line. For them switching over to CNG or LNG is a no brainer. Their trucks are on the road all the time. They consume a lot of fuel. Switching over to a different fuel that costs almost half translates into major savings. Some operators are getting the message and are beginning to purchase natural gas fueled vehicles. But the process is still in its infancy. And, while some are being built, as of today there aren’t enough refueling stations to guarantee supplies across the country.

Major benefits

That said, this is a huge potential and in part actual market. There are about 9 million heavy vehicles on the road in America. All of the them could be supplanted by trucks running on natural gas, with clear advantages for the owners who pay for fuel and for the US domestic gas industry that would gain many new customers. Add to that major balance of payments benefits, as America would import far less oil, as well as energy security benefits. Clearly, the more energy self-reliant America can become, the better it will be from the stand point of national security.

Given all this, it is beyond comprehension why this huge utilization opportunity is not even mentioned in a major news story that discusses what to do with “too much” US gas. Sure we can export some of it. However, using it at home, this way benefiting the US economy more directly, would be much better.

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