According to recent media reports, there are some
people who believe that $4 per gallon gasoline will result in the loss
of hundreds of thousands of jobs due to the reduction in disposable
income from higher priced fuel. I disagree with this train of thought
based on two theories; one that Americans will drive the vehicle they
want to drive, when they want and where they want until they no longer
have the physical ability to do so; and two Americans will seek the best
way to get what they want and acquire the technology to do so,
especially when economically feasible.
Assumptions in this case
are the following:
250,000,000 vehicles in
Daily average fuel use per
vehicle of 4 gallons per day .
National average price of
$4 per gallon .
Average price nationally
of $2.35 per gasoline gallon equivalent (GGE) for Compressed Natural
Gas (CNG) 100 vehicles to be converted on average to run on CNG per
CNG Fuel station.
Natural Gas is Domestic.
Natural Gas has lower
emissions than either gasoline or diesel fuels.
Natural Gas is both a
fossil fuel AND a renewable fuel source.
Natural Gas deposits in
the United States coupled with landfill gas sequestration are
capable of producing enough fuel for over 100 years at an
anticipated price consistently 30-50% cheaper than oil.
There are three breakeven
models that have to be reviewed to determine the economic viability of
an alternative fuel on a large scale in the United States: (1) The
economic viability of the consumer, (2) the economic viability of the
Station owner and (3) the economic viability of the equipment/gas
First, is it cost effective
for the consumer to convert their vehicle to run on CNG or purchase a
new vehicle that is capable of running on CNG with NO government
Based on our limited market
research, we have found that the average consumer is willing to have a
three (3) year breakeven on a vehicle conversion to CNG. Now, based on
the assumptions of $4.00 gasoline and $2.35 CNG, that would make a
vehicle conversion at a price below $7,227 a logical purchase. With a
price in the $5000 range, we would not only be able to sway the average
consumer, but anyone that is using a minimum of 2.8 gallons per day.
Second, is it cost
effective for a station owner to build a CNG Fuel station with little or
no government subsidies?
Based on our experience and
the experience of our clients we can safely assume that sales of 280-400
gasoline gallon equivalents of CNG per day, initially, with a growth
plan averaging four to six times that amount over the next several years
can make the station work. In some cases, additional revenue sources
may be required for success; such as an alternative fuel vehicle
conversion/repair facility and/or a convenience store. The cost of the
land, cost of the commodity and cost of the equipment to satisfy the
fueling expectations of the customers are the factors that are assessed
in determining a stations feasibility.
Lastly, is it cost
effective for suppliers? We can answer that simply by saying YES.
What has changed that makes
CNG such a viable alternative to traditional petroleum based fuels? The
answer is simple; supply has increased faster than demand. Combined
with the fact that you cannot convert existing gasoline powered vehicles
to electric and considering that the government and private fleets are
extending the life of vehicles currently in their fleets due to budget
cuts. GM is hoping to sell 10,000 Volts this year and that depends on
getting all of the parts they require and getting them shipped out to
their dealers on time. That is good, but it is a drop in the bucket of
what we need to accomplish in the big picture. For every new Volt that
is purchased, we could convert approximately 10 vehicles to CNG and
reduce our dependence on foreign oil that much faster.
Now let’s look at the tax
implications of CNG. As a domestic fuel, every GGE (gasoline gallon
equivalent) of CNG is taxed at the supply level. Let’s assume that
number is $200 from each station per month. Additionally, let’s assume
that we are reducing at least 10 barrels of imported oil per station per
day. At $110 per barrel, we are reducing our trade deficit by $33,000
per month. If our program was fully implemented, we would reduce our
trade deficit by $2,739,000,000 per MONTH. Since we aren’t spending it
abroad we don’t have to borrow to pay for it, resulting in interest
savings of another $990 per month per station or $85,140,000 in savings
to the country per MONTH upon project completion.
Now, let’s look at employment.
We are currently at a national average of 8.8% unemployment as a
country. The hardest hit industry in the country is construction. The
development of CNG stations throughout the country will result in
thousands of construction jobs, with the resulting lower fuel costs
increasing the disposable income enabling people to buy houses and thus
revitalizing the construction industry. Assuming we take 5 people off
of unemployment per station built, we would save the United States over
$2000 per month in reduction of unemployment benefits and increase
revenue with payroll and sales tax on the purchases they are able to
make. This is not the biggest reason, but half a million permanent jobs
and 2.5 million part time jobs would put a big dent in our unemployment
costs and give a big boost to our economy.
CNG conversions have exceeded
the economic viability test up until this point. What has changed to
make this a reality? The EPA has finally created a regulatory and
certification process that is affordable, meaningful and realistic
allowing more widespread use of CNG. You can read more about the rule
change at http://www.epa.gov/otaq/consumer/fuels/altfuels/420f10002.htm.
How many stations can be built
in the United States? This is a tough question, assuming 300 vehicles
per station upon maturity and assuming that CNG will never exceed 10% of
the total fuel picture we would be looking at over 83,000 stations.
With an initial cost in the $350,000 range that would be an
infrastructure investment of over $29 Billion. Why would the American
public want a $29B gaseous fuel infrastructure system in place? The
answer is clear: if a hydrogen fuel cell is ever produced that can be
sold commercially and cost effectively, it is going to require natural
gas and gaseous fuel stations. If electrification is ever going main
stream, it is going to require a 480V charging system that is not in
place and could be easily added to these stations when electric is being
added if the electricity providers will install the equipment on
anticipation (a request that was denied by the utility at our first
The alternative fuel market is
going to happen in pockets; Pockets of acceptance around the country
with accommodating utility providers and willing mechanics and
permitting officials. Not every group of environmentalists is wrong.
Not every group of climate change deniers is wrong. Argument can be
made that we are simply in a waxing and waning period between ice ages.
Assuming we have another 10 Million years before the next ice age, we
have to figure out a way to provide energy to 7 billion people In the
The largest number of Natural
Gas Vehicles (NGV's) is found in Argentina, Brazil, Iran, Pakistan and
Thailand according to Wikipedia. The Chinese are following in the
United States footprint. Looking at battery and hydrogen while buying
more gasoline powered vehicles. “The entire surface transport of India
is based on petroleum fuel, but its availability is of growing concern.
The production of domestic crude has been declining and the transport
system has been increasingly dependent on imported crude oil to meet its
needs. There is a growing concern that the world may run out of
petroleum based fuel resources. All these make it imperative that the
search for alternative fuels is taken in right earnest.” according to
Auto Guide, an Indian publication. The alternative fuels aspiring to
take the place of petroleum are the same as all other countries; natural
gas, propane, ethanol, electric, bio-diesel, bio-fuel and hydrogen.
China and the United States are
very close to having the same amount of vehicles on the road now. The
difference is that the United States has an option and China does not.
Shell is drilling 17 wells, including for tight gas and shale gas, in
China and plans to spend $1 billion a year over the next five years on
shale gas in China if its exploration works under way prove a success.
China is the early stages of developing shale gas and does not have any
reliable reserves estimate of the alternative fuel. Until either a
battery is designed that can efficiently and cost-effectively power a
vehicle or a hydrogen fuel cell is created with a cost-effective
refueling mechanism, China is going to be using oil. As long as China
continues to use oil, the demand will exceed the supply at prices below
$110 per barrel and likely continue to spike and rescind but constantly
increase in price until such time that the reserves are exhausted,
whether that is in 20 years or 20,000 years is irrelevant if the cost of
extraction makes it economically unrealistic to use.
The United States has 32% of
the world’s vehicles. ( Nearly 1 car per person.)
8 Million NGV's globally / 603 million vehicles = 1.3%
150,000 NGV's in US / 287 million vehicles = 0.000005%
For the United States to simply CATCH UP to the rest of the world, we
need to have 3,731,000 Natural Gas vehicles in the US. We currently
have less than 200,000.
The United States of America
has long prided itself on being a world leader. For our country to fall
so greatly behind on a matter which impacts us environmentally,
economically and from a position of national security is a travesty.
The enormous sums of money being paid to foreign countries – most of
which we have tense relationships with at best – is a seriously flawed
position – especially in consideration of the fact that in return for
the hundreds of billions we are spending annually for a product which is
inherently dirty to our environment, unhealthy for our society and an
economic burden we can no longer afford to bear.
Whether you believe that
alternative fuels must be driven by the frightening status of our
economy and bring this foreign problem home to a domestic solution,
environmentally in an effort to improve the quality of our air or from a
position of ensuring a national security position that does not put us
at risk of being controlled diplomatically or financially by other
nations – the very real fact we must face today is that this is a change
that is long overdue and must be implemented today.
It’s going to take everything
we have to make it happen: wind, solar, CNG, electric, biofuels,
propane, ethanol, hydrogen, gasoline, diesel, nuclear, thermo,
Isn’t it time we catch up with
the rest of the planet and embrace CNG? www.wisegasinc.com