Relatively low prices for natural gas and high production in shale gas provide the right conditions to bring about the penetration of natural gas vehicles (NGVs) in the country’s automobile fleet. The benefits are widespread, with consumers gaining more diversity and increased cost savings in transportation. There are also national security implications, allowing the U.S. to reduce dependence on foreign oil supplies. Using NGVs can also reduce emissions and helps support the domestic natural gas industry.
Relatively low prices for natural gas and high domestic production provide the right conditions to bring about a greater penetration of NGVs in the country’s automobile fleet.
In a webinar hosted by the American Trucking Association and Securing America’s Future Energy (SAFE), two major business leaders and the head of a Washington-based trade group touted the importance of having more NGVs in the country’s vehicle mix. During the discussion, Frederick W. Smith, President and CEO of FedEx Corporation and co-Chair of SAFE’s Energy Security Leadership Council (ESLC), T. Boone Pickens, business magnate and financier, and Matt Godlewski, President of Natural Gas Vehicles for America, touted the economic, environmental, and national security benefits of NGVs and discussed ways natural gas can change the transportation and energy landscape in coming years and decades.
The economic case for NGVs
The economic benefits of using natural gas as a fuel have become apparent with the domestic shale boom. Market dynamics have changed considerably in the past several years, making natural gas more attractive for the trucking industry. Against this backdrop, fleets of all sizes have increasingly utilized natural gas. With natural gas prices under $3 per MMBtu (the equivalent of $18 oil), the fuel has the opportunity to significantly lower costs for users. Not only is natural gas lower on a relative basis than oil; it is less volatile. “Natural gas is a more stable-priced commodity than oil,” Smith said, adding that stability stems from the fact that most of what the country consumes is domestically produced. By contrast, oil is traded on a global market and vulnerable to fluctuations from events outside the U.S., particularly instability in OPEC countries.
“Natural gas is a more stable-priced commodity than oil.”
Besides the low price, natural gas is “extraordinarily abundant,” Smith said, thanks to the fracking revolution. The massive amount of reserves in the U.S. promises to keep prices low and supply available for decades to come.
Smith’s company FedEx is moving forward with using compressed natural gas (CNG) in its freight unit. New engines that use CNG have come down in price, allowing companies like FedEx to increasingly include NGVs in part of their fleet. Smith pointed out that in the next couple of weeks, his company will open a CNG terminal in Oklahoma City for its heavy trucks to refuel. In a sign of confidence that natural gas will be beneficial for FedEx, Smith said other terminals will follow. With the heavy-duty truck industry consuming some 3 million barrels per day, or 15 percent of the country’s total demand, there is a lot of room for natural gas to displace oil demand.
Godlewski pointed out that although the industry is hesitant at times to change, the new engines which run on natural gas are more reliable and efficient than those used in the past, giving companies a “diesel-like experience.” Besides the trucking industry, city buses and ships carrying freight have or are poised to transition to natural gas because of a robust return on investment.
Natgas a ‘superior fuel’ for the environment
Besides reducing costs for companies, the environmental impacts of NGVs are positive. “The economic and environmental benefits are so great they make sense today,” said Smith.
Natural gas is cleaner than other hydrocarbons, cutting both greenhouse gases and nitrogen oxide emissions. Pickens, who stated that natural gas is “such a superior fuel,” pointed out that Cummins Inc., which designs and distributes diesel and natgas engines, has built an engine that will cut nitrogen oxide by an astonishing 90 percent.
Natural gas is cleaner than other hydrocarbons, cutting both greenhouse gases and nitrogen oxide emissions.
Since natural gas is friendlier to the environment than diesel, the case for NGVs grows stronger. There are openings to make greater inroads as environmental goals become more stringent. For instance, Godlewski pointed out that one big opportunity is occurring in California, where regulators have set an ambitious goal of significantly reducing nitrogen oxide emissions. In another reflection of the extent to which natural gas is seen as a positive development for transportation, truckers and shippers that originally justified the use of natural gas on economic grounds now have in their implementation strategies a focus on environmental goals.
Reducing reliance on OPEC
With natural gas abundant in the U.S., for now and the foreseeable future, consumers in the trucking industry will be burning fuel produced domestically, helping to cut imports of oil. Pickens hit home the argument that increasingly relying on natural gas for transportation in the U.S. can sharply reduce dependency on the OPEC cartel and boost national security, while Smith pointed out that many of the conflicts of the 20th Century surrounded oil, making it all the more vital that North American countries push for energy independence.
Increasingly relying on natural gas for transportation in the U.S. can sharply reduce dependency on the OPEC cartel and boost national security.
“I can’t imagine that we buy oil from the Mideast and fund both sides of the [conflicts in the region] when it is unnecessary and stupid to do,” said Pickens. “We have more oil and gas than anyone else in the world.” He added: “[We need to] get off of OPEC oil. We could do that quickly if we had the leadership in Washington.”
The trucking sector to see benefits from autonomy?
While some experts believe autonomous vehicles will first take off in urban environments, others see the trucking industry adopting the new technology just as quickly, particularly since it would be easier to use on open roads and the interstate system. Smith’s comments on technological changes were bullish. He said they should be embraced in order to improve safety and increase efficiency. He did, however, note that the trucking sector will always need well-trained drivers to be in vehicles in order to take over when necessary. Still, autonomy provides a big opportunity to mitigate fatigue of drivers—they can rest while autopilot runs the vehicle.
“Complete autonomy, at least for the foreseeable future, is not realistic, at least for the commercial sector,” said Smith.
There are a few other benefits that autonomy can provide for the trucking sector. For one, the industry loses almost $50 billion per year sitting in traffic. With autonomous vehicles expected to use infrastructure more efficiently, they can relieve congestion and in turn lessen the time trucks need to spend on the road. Secondly, increased safety will hopefully reduce litigation surrounding trucking accidents, cutting down legal costs, which will be particularly beneficial for smaller firms. Lastly, CNG is less flammable than petroleum-based products, making it safer in accidents.
Reducing dependence on oil
Natural gas is produced abundantly in the U.S., it helps lessen demand for oil, and it is a viable and cost-effective alternative.
When Smith joined the ESLC more than 10 years ago, the group’s Recommendations to the Nation on Reducing Oil Dependence included calling for producing as much energy as possible domestically, using less oil altogether, and seeking alternatives to petroleum products. When discussing these goals during the webinar, Smith said they are just as important today as they were then. The world consumes some 95 million barrels per day, with 70 percent of that fueling the transportation sector. Using natural gas in the trucking industry helps meet all three of the goals of the recommendations. Natural gas is produced abundantly in the U.S., it helps lessen demand for oil, and it is a viable and cost-effective alternative.