Warm Southern Breeze

"… there is no such thing as nothing."

What will America use to fuel her vehicles when gas is $8/gallon? Natural gas – and we may do it much sooner!

Posted by Warm Southern Breeze on Wednesday, May 23, 2012

Natural gas.

In fact, it’s being done now.

It way, way, way, way, way, way cheaper than petroleum, and burns clean too!

If you want to see the future, look at Interstate Commerce.

And, here’s another good side to natural gas as a fuel – because it burns cleaner, the engines last exceedingly longer! So now, your 100,000+ mile vehicle becomes a 200,000+ mile vehicle!

Shale Gas Set to Reshape Trucking


Updated May 23, 2012, 4:23 p.m. ET

Rising diesel costs, last year, forced Waste Management Inc. WM +0.91% to charge customers an extra $169 million, just to keep its garbage trucks fueled. This year, the nation’s biggest trash hauler has a new defensive strategy: it is buying trucks that will run on cheaper natural gas.

In fact, the company says 80% of the trucks it purchases during the next five years will be fueled by natural gas. Though the vehicles cost about $30,000 more than conventional diesel models, each will save $27,000-a-year or more in fuel, says Eric Woods, head of fleet logistics for Waste Management. By 2017, the company expects to burn more natural gas than diesel.

Darrold Withrow, 41, is a certified fueler and mechanic at Waste Management, and he fills up a truck with liquefied natural gas in Oakland, California. / Photograph by Alison Yin for The Wall Street Journal

“The economics favoring natural gas are overwhelming,” says Scott Perry, vice president of procurement at Ryder Systems Inc., R +2.31% one of the nation’s largest truck-leasing companies and a transporter of goods for the grocery, automotive, electronics and retail industries.

The shale gas revolution, which cut the price of natural gas to about $2.70 a million British Thermal Units in the past year, already has shaken up the utility industry, which is switching to natural gas from coal in a big way. Vast Amounts of natural gas in shale rock formations have been unlocked by improved drilling techniques, making the fuel cheap and plentiful across the U.S.

Now the shale-gas boom is rippling through transportation. Never before has the price gap between natural gas and diesel been so large, suddenly making natural-gas-powered trucks an alluring option for company fleets, rather than an impractical idea pushed mainly by natural-gas boosters like T. Boone Pickens, the Texas oilman. Railroad operators also are being affected as coal shipments decline.

Challenges remain, of course. A scarcity of re-fueling stations, particularly for long-haul truckers, bulky tanks for compressed gas and hazards of handling liquefied gas remain concerns for many fleet operators. In the past, the volatility of natural-gas prices also hampered wider use.

But today, truck manufacturers are embracing natural gas for everything from bi-fuel pickup trucks like the Chevy Silverado HD to 18-wheelers that can burn natural gas either compressed, called CNG, or super-chilled, called LNG. Navistar International Corp., NAV -1.32% Cummins Inc. CMI +0.57% and General Motors Co. GM +2.93% all are courting the market with new natural-gas powered trucks or engines.

Navistar’s goal is to “expand to a full range of products using natural gas in the next 18 months,” says Eric Tech, president of Navistar’s engine business. This year, the Illinois company is introducing delivery trucks burning natural gas. Next year, it is adding long-haul trucks with its biggest engines.

Mr. Tech thinks that in a couple of years, one in three Navistar trucks sold will burn natural gas. “This is not a subsidy-driven market,” Mr. Tech says. “It’s developing on its own because the economics are compelling.”

Corporations like UPS and AT&T T -0.54% are buying the vehicles. AT&T recently ordered 1,200 Chevrolet Express cargo vans equipped to run on compressed natural gas, which General Motors said was its largest CNG vehicle order ever.

Ryder Systems began renting out natural gas trucks in California last year, so customers could kick the tires. The response has been so strong Ryder is expanding the program to Michigan and Arizona. And it’s introducing them in truck clusters it operates for big box retailers like Staples Inc. SPLS +0.29% and manufacturers including carpet-maker Mohawk Industries Inc. MHK +2.35%

For years, a barrel of oil cost about as much as six units of natural gas and their prices moved in tandem, notes Don Mason, a gas-industry consultant in Ohio. Today, a barrel of West Texas Intermediate crude costs more than 33 times as much as a unit of natural gas in the U.S., and at the pump, a gallon of diesel often costs more than twice as much as compressed natural gas, on a diesel-gallon-equivalent basis.

“I think we’re at a turning point, even if it’s a slow, wide turn,” Mr. Mason says.

Although the U.S. has loads of natural gas, adoption of natural gas vehicles has been spotty. Less than one-tenth of one percent of vehicles on American roads burn the fuel today and the percentage sagged slightly from 2005 to 2010, when federal policies encouraging their use waned. The number began edging up last year, lifted by market forces.

Meanwhile, in the Asia-Pacific region, natural gas vehicle sales have grown at an average annual clip of 42% during the past decade, according to NGV Global, a trade group formed in 1986 to promote gas-friendly policies. Pakistan led the list in 2010 with 2.7 million natural gas vehicles, though many are tiny tuk-tuks, out of a total of 13 million natural gas vehicles worldwide. The U.S. came in 14th with 112,000 natural gas vehicles.

Many people are trying to figure out whether natural gas really has legs as a transportation fuel. Greg Burns, chairman and chief executive of PLS Logistics Services Inc. in Pittsburgh decided this year to ask 100 trucking company executives. The result: eight in 10 respondents said natural gas in its densest form, as LNG, has potential for highway use. Nearly a third said they were actively researching it for their own companies. But 54% said current infrastructure is inadequate and 23% worried about the higher cost of the trucks.

Mr. Burns’ conclusion: “If you have a long-enough timeframe, it’s a pretty bullish picture.”

Some truckers soon will have the ability to hedge their bets. That’s because the Environmental Protection Agency recently approved retrofit technology for big rigs that lets them burn LNG and diesel.Kathryn Clay, executive director of the Drive Natural Gas initiative of the American Gas Association, says “the new technology is really game changing because the trucker can run on either fuel, eliminating refueling anxiety.”

No one doubts that the potential market is enormous. The 3.2 million big rigs on U.S. roads today burn some 25 billion gallons of diesel annually. Almost 7 million single-unit trucks, such as United Parcel Service Inc. UPS +0.32% or FedEx Corp. FDX +2.18% trucks, consume another 10 billion gallons of diesel. Converting even a modest number of these trucks, which often get 5 to 8 miles a gallon, to natural gas could save significant amounts of money. Tailpipe emissions also would drop, since natural gas burns cleaner than diesel or gasoline.

If large numbers of fleet operators decided to embrace natural gas, it could rev up truck manufacturing, which slowed dramatically during the recession. North American heavy duty truck sales peaked in 2006 with 360,000 units, just ahead of tighter emission standards, and plunged to 110,000 units in 2009.

Noel Perry, principal at Transport Fundamentals Inc., a trucking research company in Lebanon, Penn., says one disadvantage of natural gas is that it’s not as dense as diesel. CNG is only 25% as dense and LNG is 60% as dense. That means trucks need more tanks or bigger tanks to go as far, or they must refuel more often. That’s not a big deal for city buses or delivery trucks that go back to home base each night, where they can refuel. But it’s a problem for trucks that drive unpredictable routes or venture out into the hinterland.

Ann Duignan, managing director at J.P. Morgan Equity Research, says “there’s huge excitement” about natural gas but infrastructure immaturity will depress truck sales. She expects fastest adoption among fleets that can run on CNG and return home each night but is skeptical about long-haul trucking. “It will be slow, steady, one-fleet-at-a-time type growth,” she says.

Write to Rebecca Smith at rebecca.smith@wsj.com


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