We were pitching a potentially very good customer yesterday – a commercial shop, a family owned company, who is considering the move to CNG. They knew their business (which is manufacturing), and their customers.
What they also know is that their fuel costs are exorbitant (and they do not use petroleum, but rather diesel). They have been considering the switch to CNG or propane (as many of our potential customers seem to be) but the usual factors of everything from gas station availability to lack of parts and service has delayed an obvious decision for about a decade.
We had a secret weapon up our sleeves yesterday, having the ability to draw upon the encyclopedic knowledge of the President of the local Clean Fuels Coalition who joined us, so many of these questions were answered summarily and with the voice of about twenty years experience.
One of the more interesting discussions that came up was one we want to discuss (briefly) in today’s blog because it is something worth pondering: what happens to CNG prices when there is an increased demand? Won’t prices just skyrocket into the stratosphere like petroleum already has?
While this is a complicated topic, we are going to do our best today to give the very simplistic overview of why CNG is not the same as petroleum when it comes to commodities.
First, there is an abundant supply of CNG (starting within domestic borders) so civil wars and fits of pique from OPEC won’t drive up prices, nor will it allow speculation that such a thing “might” affect the supply line from bored and ambitious Wall Street types looking for a quick buck.
Natural gas is being deregulated in many states and jurisdictions from Ontario and Alberta in Canada to Maryland, California, Georgia and Pennsylvania in the lower 48. This means that a household or business can buy gas directly from a supplier at a competitive price — not just from the gas utility. These utilities, however, continue to have the franchise to distribute gas and charge a regulated fee.
The industry itself is now also being deregulated, which from previous history, has actually lowered prices for consumers. In the gas business, deregulation places a bit of a halt on this kind of commodity speculation in that it separates the sale of the commodity from it’s distribution. The product is available from multiple sources (which keeps prices competitive) but delivery is a standard regulated fee set by the states. A good analogy would be a situation where you buy milk online but it is delivered to your door by FedEx.
In the case of utilities, the distribution will remain regulated, but the commodity supply will be a free market.
Because CNG is being regarded as a “transition” fuel (to hydrogen fuel cells) and because the amount of domestically harvested gas is so large, we think that this will quell the kind of speculation in the gas market vs. the petroleum market until we all can make the switch to electrically powered, high performance cars. Experts predict this is about a twenty year lag time.
While there are also case studies showing how state utilities can also be held hostage by suppliers (for example the Enron debacle in California about a decade ago where the company literally blackmailed the state in a bid for higher electricity charges and created rolling brownouts as an added incentive), we hope that the model, we for one will implement will minimize if not negate this kind of threat.
We’ll keep you posted on our sales success stories when we can. For now, we thought we would just expound on this aspect of the transition of our fuel economy if not regale you with an interesting startup story.
- Ford natural-gas taxis hit streets in Southern California (content.usatoday.com)
- MAN plans CNG push with new EcoCity (busandcoach.com)
- Auto Truck Group Begins CNG Conversions (prweb.com)
- CNG Fueling Station Operation & Maintenance Certification Course (gbrccc.wordpress.com)
- Saddle Creek Corp. Invests in Natural Gas Trucks (prnewswire.com)
- Official: Ford Transit Connect CNG taxis swing into action across U.S. (autoblog.com)