By Paolo von Schirach
July 17, 2013
WASHINGTON – The only real bright spot in the otherwise uninspiring scenario of the US economy is energy. Thanks to geology and old-fashioned Yankee ingenuity American energy firms (with zero government help) managed to develop the technologies enabling them to extract huge amounts of oil and gas from deep rock formations. Thanks to hydraulic fracturing (better known as “fracking”) and horizontal drilling America is once again a world leader in energy production. For a country believed to be in terminal decline when it came to hydrocarbons reserves, this is an amazing come back. Oil production is way up, (think of North Dakota). But the real revolution is that the anticipated end of US natural gas production in just a few years turned into a glut. Yes, America is now the largest natural gas producer in the world –bigger than Russia.
Natural gas bonanza
This energy bonanza has consequences. Thanks to natural gas America now has the lowest electricity prices in the industrialized world. This will attract energy intensive industries to America, while reducing the cost of doing business across the board. All this is good news. But it can get better — a lot better.
America produces more of its own oil, and more will be imported from oil rich Alberta in Canada. However, we could say a final “good-bye” to OPEC by choosing to use a significant portion of our new natural gas as transportation fuel.
The main advocate of this money-saving and environmentally friendly shift has been and still is T. Boone Pickens. 5 years ago the old oil man launched his “Pickens Plan” through which he advocated the adoption of natural gas as transportation fuel, starting with heavy trucks. Indeed, if we can imagine the 9 million heavy trucks on the road running on our own domestically produced gas, we could also appreciate the financial and national security beneficial impact of cutting our imports by about 3 million of barrels a day. This would be huge.
Heavy trucks running on CNG, LNG
Now, the good news is that this shift from diesel to natural gas makes perfect economic sense, because Compressed or Liquefied Natural Gas (CNG, LNG) is lot cheaper (and cleaner) than diesel. So, if you are a Wal-Mart, a FedEx, a UPS or an At&T you can do the math and see that this shift to gas will amount to significant savings, year after year.
In order to make this happen, fleet operators needs a few preconditions in place. They need state of the art CNG or LNG burning engines. And they also need a nationwide network of strategically located refueling stations.
Well, according to Pickens, we are getting there. The Natural Gas Highway now allows an 18 wheeler powered by domestic natural gas to travel coast to coast without running out of fuel. Many, many more refueling stations are needed, of course. But the backbone is now in place. And Cummings will soon start selling a 12 liter engine running on natural gas. According to industry experts, this seems to be the appropriate engine size to have cost effective natural gas burning trucks.
Public policy signal?
The missing element here is a strong public policy signal. The Federal Government could provide major support for this diesel to CNG, LNG “fuel shift” by declaring that all Federal Agencies from now on will start buying only heavy vehicles powered by domestic fuel. Yes, this would be a great idea, and certainly a boost for all industries involved (energy producers, refueling stations and engine manufacturers) and for those fuel users who are still undecided about conversion to natural gas.
But this helpful signal is not coming. President Obama needs to be nice to the environmentalists. Despite the fact that natural gas is by far the cleanest among fossil fuels, anything that may even look like an endorsement of hydrocarbons is apparently not respectable.