Assume you drove 50,000 miles a year in a truck that got six miles to the gallon... Diesel costs about $4.50, and CNG equivalent costs about $1.75 per gallon equivalent. Add in the extra $50k for the price of the NG engine over the diesel, and subtract $32k in government incentives, and you would get a cost savings of $191,898 a year.
The additional NG cost of the truck would pay for itself in 0.94 years. And with economies of scale, the additional cost of a NG engine will drop to around $25k.
That kind of savings speaks for itself... which means NG long-haul trucking is about to accelerate.
There are now 1,190 compressed natural gas (CNG) stations and 78 liquid natural gas (LNG) fueling stations across the country. Clean Energy Fuels (NASDAQ: CLNE) just bought an LNG refinery from GE and is building another 75 stations to sell to long-haul truckers.
What's the Diff?
LNG is better for heavier trucks and locomotives (GE is building these); CNG is better for cars and fleet vehicles, like the kind used by UPS and FedEx and for waste management.
There are a lot of big players pushing this trend. Royal Dutch Shell (NYSE: RDS-A), for one, is betting big that LNG will expand. Shell thinks the use of LNG will double to 400 million tons by 2020 and could hit 500 million tons by 2025. This growth will require a industry investment of $700 billion worldwide.
Both Shell and ExxonMobil (NYSE: XOM) produce more natural gas than they do oil.
Less than one-tenth of 1% of vehicles burn natural gas today.
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Poster Comment:
Author assumes NG price will remain low but with export demand in Asia, electricity generation and a few cold winters...