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Natural Gas Profit Opportunities

Jeff Siegel

Written By Jeff Siegel

Posted October 5, 2011

They tried to lure me with the promise of a cleaner-burning fuel.

Then they played the “home-grown, domestic natural gas” card followed by the appeal of a 30% discount every time you gas up.

“It all sounds great,” I told the rep from Honda.

But in my head, all I kept thinking about was how much time and money Honda is wasting on pushing their natural gas-powered passenger car.

Don’t get me wrong; our extraordinary bounty of natural gas offers a huge opportunity to displace enormous amounts of foreign oil. And that’s exactly what’s going to happen as we get sucked further into the vortex of Peak Oil.

But natural gas-powered vehicles are not going to be personal transportation vehicles… They’re going to be trucks and buses.

2.5 Million Barrels per Day

It’s not rocket science.

Today’s fleet of U.S. trucks and buses consumes about 2.5 million barrels of oil per day. Transitioning our trucks and buses from diesel to natural gas would allow us to displace 42 percent of what we currently import from OPEC nations. Not a bad deal.

Of course, some would suggest that we should do the same with our passenger vehicles. But accomplishing such a thing is simply unrealistic — at least at the scale where it would have any significant impact…

Because for the most part, consumers will reject them.

It’s been an uphill battle just to get folks to embrace the transition to conventional hybrid vehicles — and that required zero infrastructure development or changes in how we fill our tanks. Now imagine throwing natural gas-powered vehicles into the mix, and requiring consumers to jump through hoops to find a CNG filling station.

It’s a similar situation that electric vehicle manufacturers face today. There is simply not enough public infrastructure to power the electric vehicles that are now traveling our nation’s roads.

However, it’s a lot easier and cheaper to build charging stations than it is to build CNG stations to accommodate even a small percentage of our passenger vehicles. And a nationwide network of electric vehicle charging stations is under development right now.

When I spoke with that Honda rep a few years ago, he showed me how easy it was to refuel a natural gas vehicle by tapping into my home’s natural gas line. You can actually go out and buy the equipment, and have a licensed installer put the thing in your garage. But that’s not easy, nor is it worth much to someone who doesn’t have a garage.

Theoretically, a natural gas-powered vehicle is appealing. After all, not having to rely on foreign oil is a big plus for all of us. And a cheaper fill-up is nothing to ignore — especially these days.

But in practice, I don’t think the natural gas-powered vehicle will have nearly the same impact on personal transportation as the electric vehicle.

Electric vs. Natural Gas

While I listened to the pitch on how easy it was to tap into my home’s natural gas line to refuel a natural gas-powered car, I couldn’t help but obsessing over the fact that it’s a hell of a lot easier to plug my car right into an outlet that already exists.

No need to get anything installed, no need to screw around with my gas lines.

Of course, Honda’s natural gas-powered vehicle will certainly travel further. With an 8-gallon fuel tank and an average fuel economy (natural gas equivalent) of about 32 mpg, a full tank will get you about 250 miles.

The Nissan LEAF all-electric vehicle will only get you about 100 miles. So clearly, Honda’s natural gas Civic wins out in the range category.

But that’s only temporary…

By 2030, the combination of new battery chemistries, light-weight carbon fiber technology, and improved design will allow electric cars to deliver all-electric ranges of about 600 miles.

Think about that for a moment… In less than 20 years, electric cars will deliver a 500% increase in fuel economy.

In comparison, conventional internal combustion engine vehicles have barely increased since the Model T debuted with a fuel economy between 12 and 21 mpg. One of today’s most fuel-efficient internal combustion engine vehicles is the 2011 Hyundai Elantra, which comes in at around 33 mpg (combined).

So we’re looking at a fuel economy increase of about 94% — and it took more than 100 years to get there!

And by the way, by 2025, about 90 percent of all public charging stations will be using quick-charging technology that’ll recharge your car in about 20 minutes. Of course, with a 600-mile range, how often will you even have to charge anywhere else other than your own home?

For now, the natural gas-powered Honda might get some decent media attention. And certainly it could do well with fleets. But in less than 20 years, no ordinary commuter will have any interest in a natural gas-powered car.

We’ll Double Our Oil Reserves

Trucks and buses are another story altogether. Truth is, in 20 years, you’ll be hard-pressed to see any bus or truck fleet manager ordering anything but natural gas-powered trucks and buses.

It’ll be the dominant technology and fuel choice in that arena.

Clean Energy Fuels Corp (NASDAQ: CLNE) and Westport Innovations (NASDAQ: WPRT) remain the darlings for investors looking to profit from natural gas-powered fleets. I believe they will remain the top choices for those looking to capitalize on this trend.

And where is all this natural gas going to come from — the massive amounts we’ll need to power our nation’s trucks and buses?

There’s so much of it, it’ll effectively allow the U.S. to double its oil reserves.

It’s already turning out to be one of the greatest disruptions the oil and gas industry has ever known. And you better believe we’re going to profit from this thing every step of the way…

In fact, we’ve already started with a new play my colleague Brian Hicks calls “the trillion-dollar drill.”


To a new way of life, and a new generation of wealth…

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Jeff Siegel
Editor, Energy and Capital

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