Car Companies Betting on More Natural Gas Vehicles

by Mike Kapsch

Car Companies Betting on More Natural Gas Vehicles

It sounds counterintuitive...

But by this summer, drivers could spend more money filling up their Toyota Prius than their Ram 2500 Heavy Duty truck, Chevrolet Silverado, or GMC Sierra 2500 Heavy Duty pickup.

That’s right. In the newest version of the Ram 2500 HD – coming out this July – drivers could save as much as $15 every time they fill up their tank compared to the Prius.

And that’s not all… This $15 savings only accounts for gasoline prices as of today. By July, who knows how high the price of oil will be and what impact that will have at the pump.

No, manufacturers didn’t just invent a new way to get great gas mileage from these heavy-duty trucks. And the U.S. government doesn’t have a secret hatred for the Prius, either.

So, then how can three gas-guzzlers cost less to fill up than a compact, fuel-efficient car like the Prius?

It’s all because of two words: natural gas.

Looking to the Future

If you’re unfamiliar with the natural gas vehicle market in America, you should know, it’s not very big.

According to the Associated Press, less than 0.1% of vehicles in the United States run on natural gas. That’s certainly not going to change within the next year or two… or even three or four.

But natural gas just may become a real alternative for the transportation industry sooner than anyone realizes.

For starters, 75% of the oil we use in America today, or just about 16 million barrels per day (bpd), is imported.

That means, at current oil prices, the United States spends about $624 billion every year just buying more foreign oil.

And of the oil we use each day, 70% or 14.7 million bpd, is consumed by the transportation industry.

It’s not rocket science. There’s simply no way we can sustain this path for the long term. And that’s exactly why natural gas powered vehicles make so much sense…

Let’s Just Get Started

Right now, gasoline prices are averaging about $3.80 per gallon. Meanwhile natural gas prices are trading around their lowest level in a decade. At the pump, compressed natural gas is as low as $2.13 per gallon.

With natural gas prices this cheap, interests in natural gas vehicles have spiked. For example, in Obama’s 2013 budget proposal, he offered to replace the current $7,500 electric vehicle tax credit with an advanced technology credit of up to $10,000. This legislation would include natural gas-powered vehicles.

Still, I can think of three more good reasons natural gas vehicles should replace cars that run on gasoline only…

  1. You don’t have to buy a new car to convert:Natural gas conversion kits don’t come cheap. You could expect to pay just about $10,000 to have it done at an auto shop.

    But don’t be surprised to see more incentives provided by the U.S. government for consumers to convert their vehicles over to natural gas.

  1. You won’t need to lose your regular gas tank: Most people don’t realize it, but natural gas-powered vehicles don’t necessarily have to run entirely on natural gas.

    For instance, MotorTrend reports the Dodge Ram 2500 HD “has a range of 255 miles on compressed natural gas and an additional 122 miles thanks to eight gallon gas tank.”

  1. The United States is already falling behind:Many countries around the world – Argentina, Brazil, Pakistan, New Zealand and others – already use more natural gas vehicles than the United States.

    But competition and the United States’ natural gas boom should be plenty of incentive to start manufacturing more cars that run on natural gas and build more fueling stations.

Of course, there are challenges.

The Risks are Worth It

The biggest one that’s keeping natural gas vehicles from breaking through to the mainstream is the fact that you just can’t go fill up your tank many places.

As the Associated Press reports, “There are around 1,000 natural gas fueling stations in the U.S., but only half of them are open to the public.”

In fact, the Ram 2500 HD, Chevy Silverado and GMC Sierra 2500 HD are all examples of vehicles that won’t be for sale to the general public.

Yet, just remember this: As long as regular gasoline prices continue surging, you’re going to start hearing a lot more about natural gas fueling stations and natural gas fueled cars.

And it could pay off in a huge way down the road for switched on investors…

Good Investing,

Mike Kapsch

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