Are natural gas vehicles the future of U.S. transport?
Natural gas as the choice of fuel—in the form of compressed natural gas (or CNG)— for U.S. consumers has increased steadily in the past few years. From 2007–2013, the consumption of natural gas as vehicle fuel has increased by ~32%. During the same period, overall consumption of natural gas has only increased by ~13%.
Over the period, car companies have initiated and commissioned new technologies in CNG-run vehicles that have made them popular to consumers, including the option to convert gasoline run vehicles to CNG power.
While the main advantages of natural gas as a transportation fuel would be the low cost and clean-burning qualities—environmental concerns are leading the way to switching to eco-friendly cars—the increasing distribution infrastructure could actually accelerate this trend, much to the favor of companies like AGL Resources Inc. (GAS), Clean Energy Fuels Corp. (CLNE), and Atmos Energy Corporation (ATO) that are building out this infrastructure.
However, gasoline is likely to remain the primary energy source to power vehicles. According to the U.S. Energy Information Administration (or EIA), standard gasoline vehicles will retain nearly 80% of new sales in 2025 and 78% in 2040.
CNG vehicle sales in the U.S.
CNG vehicle sales have increased significantly in recent times. According to the data provided by The Alternative Fuels Data Center, the sale of CNG based cars, which averaged ~4,000 from 2005–2011, jumped to more than 11,000 in 2012. That was the year natural gas prices traded below $2 per million British thermal units (or MMbtu) for several weeks, and near $2 per MMbtu for the better part of the year.
CNG vehicle sales worldwide
According to the NGV Journal, there are ~19.9 million natural gas vehicles around the world to date, with Iran—a major producer of natural gas—leading the total. It’s followed by Pakistan, Argentina, Brazil, India, and China. The majority of these are public transportation vehicles. According to the Alternative Fuel Data Center, there are ~14.8 million natural gas vehicles worldwide.
Key stocks and exchange-traded funds (or ETFs)
Some of these energy services companies that would benefit from increased use of CNG include CLNE, GAS, and ATO. Some of these are components of the Utilities Select Sector SPDR (XLU) and the SPDR S&P 500 (SPY).
To understand why natural gas can compete with gasoline as a transportation fuel, continue reading the next part of this series.
© 2013 Market Realist, Inc.
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