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Natural Gas Cars?
The drum beat for substituting natural gas for petroleum to power cars and trucks has begun to get louder. It’s been part of Boone Pickens’ plan, of course. And now Jim Cramer has picked up the theme with support from Aubrey McClendon of Chesapeake (CHK).
The concept is potentially practical since natural gas is currently much cheaper than oil on an equivalent power basis and since converting cars to NG is done in many parts of the world and is not terribly expensive. Apparently conversions are popular in Australia and I’m told that one third of cars in Brazil run on natural gas.
What would make natural gas conversions to take off in America? I suspect it would require a mainstream corporate endorsement. If a credible company starts up a Starbucks-of-NG-conversion chain of superstores (let’s say Lee Iococca came out of retirement to do it), we could see substantial movement. It would need to be coordinated with the insurance industry to assure owners that their coverage would not be impaired somehow.
Cramer mentioned three public stocks that are tied to natural gas transportation. One is Pickens’ CLNE, which focuses on local commercial vehicles. Another is a Canadian company, WPT. and the third is FSYS, a company that makes conversion equipment and which has already enjoyed a huge run in the past year. Both American companies’ stocks seem overpriced on a P/E basis. That fact by itself suggests there could be legs to this idea.
One negative indicator is that a General Motors executive is now talking about using natural gas to power the Volt. Since GM never does anything right, GM’s endorsement could be the kiss of death for natural gas. Of course GM has not officially announced they will go that way (and they may well be bankrupt before having a chance to make that announcement), so their mention of natural gas is not an official sell signal for the commodity.
On a serious note, if natural gas conversions were to become a significant trend I have little doubt that the price of natural gas would eventually rise to the energy equivalency of oil. That would make such conversions economically uninteresting (although still useful from a reduced greenhouse gas viewpoint).
Therefore, my sense is that using natural gas for personal transportation will probably not become a major U.S. trend. If it did, it would only be a temporary palliative that might delay the ultimate solution we need to achieve: electric transportation with renewable electric generating capacity.
Tags: peak oil energy investments
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9 responses so far ↓
1 fuzzydawg // Aug 4, 2008 at 7:58 am
With all due respect, I don’t think NG prices would rise to equivalent price of where oil is now - and certaily not to where oil is likely to go (i.e., $150+). Two reasons: 1) we have a LOT of it, right here in this country; and 2) since it’s domestically sourced, there’s no geopolitical risk as there is with oil.
Also a major benefit - with NG, we wouldn’t be sending billions of dollars to countries that hate us.
2 Robert Essian // Aug 4, 2008 at 8:40 am
Jim, I agree with your assertions however to turn the fleet over and that supposedly takes 15 years wouldn’t it be prudent to convert our current fleet (?%) over to natural gas until the infrastructure is in place and the electric cars have been produced in sufficient quantities to make sense from a oil import perspective.
Sounds to me that this could be done relatively cheaply and quickly. I think it has to remain on the table as an alternative in the short run.
3 Paul // Aug 4, 2008 at 8:49 am
As I pointed out in several previous comments, NG is the only solution to bridge the gap until there is a battery or fuel cell breakthrough. So far, there is no Moore’s law for batteries - a technology for all-purpose electric cars with acceptable properties simply does not exist. PHEV’s are too expensive and make no sense in long distance driving. (And if price wouldn’t matter, $200 oil wouldn’t matter either).
NG conversions (actually conversions to dual fuel: gasoline+NG) is not only popular in Australia, it’s done in huge numbers all over Europe, and in Europe most new models can be ordered with the dual fuel option. The reason is different from the rationale in the US (where there is enough NG). Western Europe has neither enough oil nor NG, and NG from Russia costs exactly as same as oil (prices are contractually linked), but gasoline and diesel are heavily taxed in Europe (cost = $10/gallon), the cleaner NG gets tax breaks. Conversion kits including installion costs between $2500-$4000.
With the dual fuel option you don’t need a dense NG infrastructure initially.
Boone Pickens has got it right.
Still, with gasoline still as low as $4/gallon the NG option will not take off without government subsidies.
4 KV // Aug 4, 2008 at 11:22 am
A few questions:
1. We agree that CHEAP pil has peaked. Does anybody know when the natural gas will peak?
2. If we can build a giant wind farm from GOM to CA rockies, why can’t we also build windfarms on east and west coasts? This will drop the transmission infrastructure cost down (use existing grids and hook up the wind generators to it).
3. NG cars makes as much sense as using SUVs to go to grocery stores, worst a coffee… Why not electric cars?
4. What is driving Pickens? Does he hold the rights to build windfarms on federal lands?
5. Why give subsidies? Why not Govt own the darn thing forever? We do that for weapons, TVA, and even FNM and FRE, why not energy?
5 Paul // Aug 4, 2008 at 1:40 pm
As to
1) Don’t know the best estimates for peak gas, and whatever estimates exist may be less reliable than the much more researched peak oil. But peak gas is much later, and at current prices NG is still wasted (flared from oil wells).
2) Because of the shift from NIMBY to BANANA: build absolutely nothing anywhere near anything. And a little bit because of where is the most wind.
3) Because the technology for electric cars does not exist. There may or may not be an economically viable “electric car” available in 2011. But the likely range of such a device under best conditions will be 60 miles, and it will take >4 hours to recharge. On a cold winter day the range may drop to 20 miles. (And don’t mention the Tesla).
4) Pickens is heavily invested in NG plays (e.g. Clean Energy Fuels). But there is still the possibility that he invested because he really believes what he says.
5) Gasoline at $4/gallon is not enough of an incentive to spend $3000 to convert a car to dual fuel (gasoline+NG). So either you have to wait until the price of gasoline doubles, or there need to be subsidies to cover conversion cost. In Europe the conversion movement took off at $10/gallon. (And by the way, whether or not the government owns “the thing”, it still needs to be paid)
6 Mark L. // Aug 5, 2008 at 7:59 am
I don’t know if any of the comments here are from actual owners of CNG vehicles.
I will speak of the facts and views as a current owner/driver of CNG vehicle located in the state of Utah. I realize that the driving experience can vary widely from state to state. My experiences have been mostly favorable. My vehicle is a dedicated CNG. If I were to do it all over I would go with a bi-fuel. The biggest disadvantage as I see it is there are too few pump stations. It’s the classic chcken/egg scenario to grow this industry. For the entire state of Utah we have about 8 public pump stations. Even in a state that is built around Nat Gas for at least heating homes and a state where we have large Nat Gas reserves… we are very limited in the number of stations. The lack of stations seems to be a big deterrent for many although I believe most are just resistant to change or have not taken the time to become educated on other fuel options. Many NGV (nat gas veh) owners have compressors at home to keep their cars fueled. The demand here has been increasing substantially… lines are getting longer at the pumps. The stations are constantly busy and I am meeting new owners every day… so at least in Utah, the industry seems to be growing. The owners of the stations make too little money on CNG… they are telling me here that they make about 5 cents per gallon so there is little incentive to start up a station. The price per gallon here in Utah is regulated but we just saw a 30 percent increase in Nat Gas last month when it went from .65 per gallon to .85 per gallon. The gallon for gallon equivalence from gasoline to Nat Gas is about the same. My Honda civic gets about 35 mpg… same as gasoline. The other challenge for NGV owners is the limited driving range due to size of the tanks. I can usually get about 150 miles with my Honda Civic. Obviously, I don’t like to let the tank get low because of the obvious nature of running out of gas. The other disadvantage for most is the tank usually takes a major portion of the trunk space.
The cost of new/existing CNG cars are reasonable although we have seen big price jumps over the last year. I purchased my 6 year old Honda Civic for $9K and I get a $3K tax credit bringing the cost to only $6K for the vehicle. If you can get your hands on a new vehicle I believe the tax credits are $2K for fed and $3K for state. Also, I am told by the long term owners of NGV that most get 200K miles for the life of the vehicle due to the cleaner burn and fewer deposits resulting in less wear and tear on the vehicle.
My commute before purchasing a CGN vehicle was about $300 dollars per month. Until we just experienced the increase from $.65 to $.85 for CNG my monthly commute cost about $47 per month now it is about $61 per month. So the savings are fairly significant.
As much as I am a proponent of Nat Gas Vehicles for at least the short term… I don’t think that it will take off in a big way. Manufacturing of new vehicles has ceased except for Honda (I believe Honda is the only one still producing and only the Civic). Pump stations will continue to increase but not at a fast enough rate. I just don’t think that people will jump on the nat gas band wagon. The idea of going out of your way to fill up is too convenient for most people. Even the government fleet which many were nat gas has moved to hybrid technology mostly because they could meet the EPA standards, not have to fuel up as often, and have an abundance of stations to fuel up. In the mean time, I’ll continue to invest my extra $250 per month in energy related stocks.
7 jimb // Aug 7, 2008 at 7:44 am
I think the thing to keep in mind is that its not binary. If cars can get 10% lighter, and americans can drive 10% fewer miles/year, and 10% of the autofleet can be powered by the electric grid, and another 10% can be powered by natgas, and tech improvements can increase efficiency 10%, etc, etc, the net affect will be a substantial decrease in domestic oil demand.
Also, two ways to adress the natgas fill station chicken and egg problem are 1.) gps technology that makes it braindead easy to find stations and automatically adds new ones as they come to be, and 2.) home pumping kits like the “Phill”.
8 J Fornear // Aug 17, 2008 at 7:41 am
Other countries are way ahead of USA on supporting switch to NG vehicles (and please note that all these converted vehicles can still use BOTH gasoline AND NG!!!), some info from web research:
… in Delhi, India, all public vehicles (buses, scooters, taxis, etc.) are required by law to run on CNG. Well over 20% of private automobiles also use CNG as fuel too due to its cost advantage… converting a vehicle to use CNG requires installing a “conversion kit’’ which incurs a capital cost of about about $800 US$. At that time, they install a CNG steel cylinder … the vehicle can run on both fuels (gasoline or CNG, there is a dashboard change-over switch).
….The Thailand Cabinet on 27 May 2008 instructed the Ministry of Transport to assist the equipping of 6,000 Bangkok buses with NGV devices. It told the Ministry of Energy and PTT Public Company to assist 42,750 taxis in becoming NGV-fuelled vehicles by the end of 2008. The two agencies were also asked to increase the number of NGV service stations to at least 260 by July 2008. The Government hopes that the promotion of the use of NGV will bring down domestic oil consumption by 100 million liters a year.
Evan McMullen, Seattle Post-Intelligencer: Most Thai taxis and many private passenger car owners have opted to spend about $1,000 per car to convert their vehicles to burn ethanol or compressed natural gas.
6 June 2008, The Nation (Thailand). Four new producers of natural gas tanks are coming online in Thailand to support the Energy Ministry’s plan to increase the percentage use of natural gas in the Thai vehicle fleet to 20% by 2012, up from 6% today.
THAILAND/GM: By Steve Carlisle,President, GM Thailand. Last year, General Motors became Thailand’s first and only automaker to offer a CNG passenger car: the 1.6-liter Chevrolet CNG Optra. It’s equipped with a slightly modified internal combustion engine and a pressurized tank to store natural gas. The vehicle is capable of running on either CNG or gasoline at the flick of a switch. … the demand for the CNG Optra has been incredibly strong. We have sold through our current inventories, will likely be increasing production in 2008 and are evaluating introducing additional CNG models here in Thailand.
William Botwick, President of GM’s Southeast Asia Operations and President of General Motors Thailand, said: “GM has been working closely with the Thai government on a number of alternative fuel initiatives, including CNG conversion technology, so we’re proud to be leading the Thai market in equipping our vehicles with CNG conversion capabilities.
9 PJ // Sep 17, 2008 at 7:22 pm
Great discussion and many good comments, it is very encouraging since I am interested to have the dual fuel option here in the US. I visited Peru last summer and was amazed at how many taxis are equipped with the duel fuel conversions. I spoke to one owner and he explained that although the lower emissions were a benefit, economics drives the demand for CNG. And because they too need more NG refueling stations, the duel fuel option allows them to burn off their NG then switch to gas and make it back to refuel.
I believe Mr. Pickens is on to something here. And I am hardly offended if he is to profit from a great idea which will help the country economically and environmentally. Just consider the “motivations” of Big Oil to keep us from weaning off of our dependence (Exxon profited $40 Billion in 2007!!! *average gallon price of $2.80) In addition, I am disgusted with how much money we send to Chaves in Venezuela and the whole of the Middle East. What a great way to tell them to F off… No more US$ for their corrupt regimes…
Like some others have pointed out, NG is a quick and viable option with our existing technology, and I believe infrastructure will ramp up with demand. The move to electric vehicles is still some years away and is in need of further development and technology improvement for electric cars for the masses. I really think we can do much more then we have. If we decide as a society it is important to us, it will happen faster than any analyst or politician believes possible.
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