When it comes to the future viability of natural gas the naysayers are having their day right now as uncharacteristically low crude oil pricing is raising doubts about the wisdom of carriers who began to invest heavily in natural gas a few years ago.
For certain, the enthusiasm about natural gas – and other alternative-powered vehicles – that was everywhere just a couple of years ago is on the wane.
Well, the naysayers can keep on talking, as I’m sure they will, but just like a cold winter or wet summer don’t mean global warming is not for real, the current state of cheap crude doesn’t mean natural gas is not a good long term bet.
The current drop in oil prices has much more to do with a game of political chicken among oil-producing nations – basically the Saudis are keeping production high and reducing pricing in the process as an aggressive play for market share.
Canada and the US are so far not backing down. There is more crude finding its way into the market from the Canadian oil sands. How?
Expansions to existing pipelines have increased delivery capabilities by 2,030,000 barrels per day (bpd). Crude moving by rail on its own is projected to increase from the 200,000 bpd in 2013 to 700,000 bpd by 2016.
Canadian exports of crude to the US are at record levels – 3,260,000 bpd. I don’t know who will be the first to blink in this game of “low price” chicken but surely someone will. And then crude oil pricing will once again start to rise.
In the meantime, fleets such as C.A.T, which is investing in 100 natural gas-powered trucks, are staying the course.
Last year 18,000 new natural gas vehicles were deployed in the US, almost half of them of the Classes 7/8 variety. The fuelling infrastructure – one of the greatest stumbling blocks to making the move to natural gas – continues to be developed. A new fuelling network connecting Montreal, Que., to Laredo, Texas, for example, should be completed this year.
Of course I’ve been around this industry long enough to remember that natural gas and other alternative fuels had looked full of promise before, only to see interest wane due to a combination of infrastructure issues, equipment hurdles and dropping diesel pricing. Why should it be any different this time around?
The sheer volume of natural gas production going on and expected to continue into the future thanks to the deep reserves of natural gas pockets discovered in the US and Canada is the difference that can’t be ignored. Such bountiful supply is sure to keep pricing of natural gas at advantageous levels compared to diesel.
And that will continue to make natural gas an enticing alternative to a growing number of fleets, particularly as infrastructure and equipment hurdles are overcome.
With more than 25 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics. All posts by Lou Smyrlis