As of the February edition, NGVJournal.us magazine will present a new series of articles titled “A View from Washington”, written by Richard Kolodziej, in which the NGV industry leader will expound on important issues regarding the business. This time, he shares his views on the collapse of world oil prices and its impact on the natural gas vehicle market.
In the US, crude oil prices have declined over the past seven months from a high of $107 per barrel to as low as $46 in mid-January – over a 50 percent drop. Since government-imposed taxes (both federal and state) are relatively low compared to Europe and many other parts of the world, the impact on the price of gasoline (petrol) and diesel fuel has been especially dramatic. Seven months ago, regular gasoline prices averaged $3.64 per gallon (87 cents per liter) while diesel prices were to $3.92 per gallon ($1.04 per liter). Last month, gasoline averaged $1.99 per gallon (53 cents per liter) while diesel prices dropped to $2.93 per gallon (77 cents per liter) – a 45 percent decline in gasoline and 25 percent decline in diesel.
US natural gas prices, too, have declined. In June, natural gas in the field was selling as high as $4.59 per thousand cubic feet (Mcf). That price declined to as low as $2.94 per Mcf in mid-January. On a Btu-per-barrel-equivalent basis, this represents a reduction from about $27 per barrel-equivalent to $17. That means that natural gas’ commodity-price advantage over crude oil has declined from almost 4-to-1 to “only” 2.7-to-1. But even at the 2.7-to-1, at the pump, natural gas still provides a significant savings over gasoline and diesel fuel of about $1.00 per gallon-equivalent.
Customers can be divided into three groups. The first are existing NGV owners who did not have plans to buy NGVs in the near term. The market is not seeing any less fuel use from these customers. In fact, with the US economy expanding and demand for trucking services at or near record levels, existing NGV customers – especially commercial fleets – are using more natural gas.
The second group are existing NGV customers who did have plans to buy additional NGVs this year. NGV companies report no appreciable chances in their purchasing plans. These companies have already made investments in fueling infrastructure, maintenance facilities, training, etc. And, while the payback periods for the incremental price of new NGVs have lengthened because the savings gap between natural gas and gasoline/diesel has closed, depending on the customer’s duty cycle, the payback period is still attractive.
The third group are potential customers who are not yet NGV users but have been considering it. Not surprisingly, there are some reports that the uncertainty over oil prices is making some in this group postpone making their NGV buying decision.
We invite you to read the full Richard Kolodziej’s column on the Number 13 edition of NGVJournal.us magazine, which will be available online in a few days.
