Article

Natural Gas Pump Prices Won't Rise Much, Clean Energy Exec Says

June 2012, TruckingInfo.com - Feature

by EngineSmarts column Tom Berg, Senior Editor

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Prices paid at the pump for natural gas by truck operators won't rise much even if gas's basic price doubles, said an executive with Clean Energy, a company now setting up retail NG filling stations and selling the fuel.


Jim Harger, Clean Energy's chief marketing officer, said a recent prediction by the president of Shell Oil that NG's price might double in a few years pertained to its commodities price, which only remotely affects pump price.

Harger also charged that oil companies make such statements to try to discourage use of natural gas as a motor fuel because it will reduce demand for their products. He was reacting directly to an EngineSmarts blog on TruckingInfo (5-31) that wondered if doubling the commodities price would damage the business case for buying natural gas trucks.

It wouldn't, Hager asserted, because the gas itself accounts for only about 30 cents of NG's pump price of about $2 per diesel equivalent gallon. The rest is the cost of transporting the gas to filling stations, storing it and pumping it into truck tanks, plus some profit and road taxes.

Petroleum, however, accounts for a large portion of the price of a gallon of diesel or gasoline, which is why prices of those fuels rise and fall with petroleum's price on commodities markets. Another factor is refinery capacity, which, when pinched, drives up prices, especially on the East and West Coasts.

Vast supplies of natural gas will help keep down both its commodities and pump prices, he believes.

"Our country is rich in NG," he said. "Reserves are estimated to be 8,000 trillion cubic feet (TCF); 50% is deemed recoverable and the country consumes 20 TCF per year. So we have a 200-year supply. With technology improvements, we'll likely be able to go after the balance of 4,000 TCF that we know is in the ground today."

Higher demand for gas as a power-generating fuel -- one of the factors cited by the Shell president for higher demand -- won't come right away, Hager continued.

"Yes, NG will eventually displace some of the coal generation [of electricity], but that will take time. Power generation should be nuclear, not fossil fuels, but that's an entirely different discussion.

"Today [June 1], the NYMEX NG index is $2.03 per million cubic feet (MCF). For every dollar NG increases, the pump price will increase by 14 cents/gallon. Recall, there are 7.2 diesel gallons per MCF. So if NG increased to $5, the cost at the pump would increase by [only] 42 cents/gallon."

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