Is Boone Pickens Wrong On Natural Gas?

By Jon LeSage,

Bloomberg is attempting to make the case that Tesla’s CEO Elon Musk and cheap gasoline prices have driven natural gas away as an economically viable vehicle fuel. But that does not seem to be the case if you look at the role compressed natural gas (CNG) and liquefied natural gas (LNG) has been playing on a global level.

Pickens is cited in the article for making the business case for natural gas vehicles going back to 2008 with the oil price spike and skyrocketing pump prices of gasoline and diesel. His arguments focused on the cheaper, stable price of natural gas and how it allowed the U.S. to free itself of oil imports, especially from OPEC.

As co-founder of the nation’s largest natural gas vehicle fueling infrastructure company, Clean Energy Fuels Corp., Pickens saw his company reach market valuation in 2012 of about $1.8 billion. The Bloomberg piece points to Clean Energy Fuels stock plummeting 90 percent since that peak as another sign that the alternative fuel is on a downturn.

Even if gasoline and diesel prices stay stable for a few years, and if Tesla and other electric vehicles see significant sales increases during that time, natural gas is expected to continue doing well for companies working in that sector.

Andrew Littlefair, CEO at Clean Energy Fuels, conceded that natural gas vehicles aren’t heading for widespread consumer adoption. However, for fleets, it is much different.

Dallas Area Rapid Transit, which has 660 vehicles in its fleet powered by natural gas, has extended its operation and maintenance contract with Clean Energy Fuels. A few cities around the country have also decided to work with the company.

Major corporate fleets such as Ryder System Inc., AT&T, and UPS, have brought in thousands of CNG-powered trucks and vans to their fleets, along with several fueling stations.

Honda decided to get out of the natural gas-powered passenger car business when it stopped production of the Honda Civic NGV in 2015. However, NGVs are expected to see growth in Europe as Volkswagen has launched a natural gas version of one of its sedans and may launch other NGVs. Government officials in Europe are putting pressure on VW and other automakers to find a cleaner burning fuel. NGVs find support for their drastic reduction in tailpipe emissions and sizable reduction in greenhouse gas emissions.

Fleet operators choosing NGVs will calculate the emissions reductions but are sometimes even more impressed with the stability the fuel offers. Fuel price volatility from petroleum, which ran rampant from 2008 through about 2013, convinced them to invest in a more stable fuel price and infrastructure, which helped companies in the NGV sector.

Fleets are also fascinated with the development in California and a few other states of renewable natural gas, which is receiving generous government subsidies backing the new fuel. Energy is being extracted from landfills and other sustainable, renewable sources to supply existing natural gas fueling stations with the clean fuel.

Another sign that natural gas is taking off as a viable energy source for transportation comes from exports of LNG. The U.S. will become a net exporter of natural gas on an average annual basis by 2018, according to the recently released Annual Energy Outlook 2017 from the U.S. Energy Information Administration.

“The transition to net exporter is driven by declining pipeline imports, growing pipeline exports, and increasing exports of liquefied natural gas (LNG),” the study says.

Natural gas has been a transportation fuel sold in high volumes in several countries around the world for many years. Italy turned to natural gas vehicles and fueling infrastructure after World War 2, as the oil supply became tight and the alternative fuel became a necessary option to tap into.

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