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Auto Industry Shifting Focus Towards Natural Gas Fuels

01 Jul

The automobile industry is looking beyond conventional gasoline towards a natural gas future.

General Motors, the United States auto giant, has announced plans to develop its first engine to run on liquefied natural gas, joining a group of other smaller companies with their sights set on utilizing the plentiful natural gas resources in the United States.

Although natural gas is widely used in electricity generation, it has not yet broken through to the transportation fuel market.  Currently only 120,000 natural gas vehicles are on the roadways.

However, auto makers expect this will change dramatically as the industry continues to strain under high, and sometimes unpredictable, oil prices.  Conventional gasoline prices spiked due to unrest in the Middle East, with crude prices rising above $110/barrel this year.  The markets have struggled with volatility and political turmoil in key oil producing regions.

In contrast, new natural gas drilling techniques have unearthed vast resources from shale rock in the United States, keeping prices low and relatively steady.  Reuters estimates that when gasoline hit $4 a gallon, drivers who used natural gas as fuel achieved a cost savings of $2 per gallon – a big deal for penny pinched companies and consumers.

The booming U.S. shale gas industry and the rise of hydraulic fracturing or “fracking” drilling practices has decoupled natural gas prices from diesel prices, making natural gas that much more attractive, particfularly to the trucking industry.  Mack Trucks, for example, has noticed a 50-100% rise in natural gas vehicle sales over the past year.

“The big draw is the difference in fuel price, especially with diesel above $4 a gallon,” explained Curtis Dorwart, vocational marketing product manager.  “The movement again toward natural gas is greater than in the late 1990s and this time it looks like it might have legs,” he continued, noting estimate that U.S. gas supply could meet 100 years worth of demand.

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