The boom in natural gas production in the U.S. has ignited a revolution in the auto sector that could reshape the way Americans fuel their vehicles, market participants and analysts said in a week-long special on FOX Business.
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Technological advancements in hydraulic fracturing, or “fracking,” and horizontal drilling have led to a surge in natural gas production. In fact, production is up 25% from 2007 to a record in 2012, according to the U.S. Energy Information Administration.
BP Capital Chairman and CEO T. Boone Pickens has been one of the most vocal advocates for using natural gas as transportation fuel.
“It’s 30% cleaner than diesel, cheaper by two dollars a gallon,” Pickens said in an interview on FOX Business. “We have more natural gas than any other country in the world.”
The transportation sector serves as a model of the changes Pickens envisions taking shape in coming decades.
The heavy-duty truck industry is on the verge of making the switch from gasoline to natural gas now that companies have developed the necessary 12-liter engines, said Andrew Littlefair, CEO of Clean Energy Fuels, the largest provider of natural gas fuel for transportation in North America.
“This is really the test year,” Littlefair said.
The Newport Beach, Calif.-based company, which operates about 360 natural gas fueling stations across the U.S. and Canada, is building stations along major interstate trucking corridors to help facilitate the switch. The company hopes the stations will become the backbone of a national fueling infrastructure.
“The defined route vehicles that have point-to-point paths -- where they start and end at the same place -- is a good starting point for compressed natural gas. 18-wheelers along defined corridors, that’s the next step,” said Kevin Book, ClearView Energy Partners managing director of research.
About 25% of the truck market could convert to natural gas by 2020, according to a report by Citigroup (NYSE:C). Buses and garbage trucks are already well down the path to adoption. Indeed, some eight in 10 new trucks Waste Management (NYSE:WM) bought in 2012 were powered by natural gas, according to the report.
ClearView’s Book sees the potential market for natural gas transcending trucks.
“I think you look at locomotives, also a very interesting and potentially very large market; and also some of the marine applications before you start talking about smaller passenger cars,” Book said.
Still, natural-gas vehicles haven’t taken off in the U.S. Only a tenth of a percent of natural gas consumed in U.S. last year was used for fuel in vehicles, according to the Energy Department. Of the more than 15.2 million natural gas vehicles on roads across the globe, about 120,000 are in the U.S., according to Natural Gas Vehicles for America, a trade group.
One of the biggest challenges to greater adoption is the lack of infrastructure.
“There’s a lot of difficulty in terms of where you’re going to fuel it until the infrastructure is there and it takes a long time to fuel unless you do it overnight in your house -- (and) that’s not currently available in most homes,” Book said.
Natural gas vehicles are also more expensive than cars and trucks that run on regular gasoline. Citi said in the report consumers pay about $7,000 to $12,000 more for a natural gas vehicle and that needs to come down to $2,000 to $3,000 to make the finances attractive for consumers.