Fleet Management News & Business Info | Commercial Carrier Journal
Issue link: http://read.dmtmag.com/i/526371
56 commercial carrier journal | june 2015 business: NATURAL GAS year and approach $90 per barrel by the end of 2016. "Since 1980, I've seen six of these collapses of half the price of oil, and I promise you it will be back up again," he said, adding that U.S. producers, who at their peak had more than 1,600 rigs drilling for oil, are responsible for the decline in oil prices. But rig counts have been cut by more than half as prices fell. "We're the one who oversupplied the market and caused it to drop $50 per barrel," said Pickens, who then compared the volatil- ity of the natural gas and diesel markets. "If natural gas doubled to $6, it would increase your fuel cost 37 cents per gallon," he said. "$100 oil in parity with natural gas is $16, and I've never seen that. I've said that in my lifetime, I don't think I'll ever see $10 natural gas again, but I do think we may see $8. But I think you're looking at $100-plus oil forever." Navigating today's challenges The natural gas truck market has faced other headwinds during the last year and a half in addition to lower diesel prices. The added costs of natural gas-powered vs. diesel-powered tractors – between $40,000 and $60,000 depending on tank configuration – have been slow to come down. An uncertain future in the used truck market has many fleets sitting on the fence before investing in natural gas equipment. And while many regional and dedicated carriers have had great success with natural gas operations, the fueling infrastructure still is being built out, and many over-the-road carriers remain hesitant to test the waters. The natural gas truck market took another hit last month when the journal Environmental Science & Technology published the results of a study coauthored by the Environmental Defense Fund that claims methane emissions from the natural gas manufactur- ing process and supply chain could lead to greater global warming than carbon dioxide emissions from diesel-powered trucks. According to EDF, methane – the main component of natural gas – has 84 times the warming power of carbon dioxide over a 20-year timeframe. "Natural gas trucks have the potential to reduce overall climate impacts compared to diesel, but only if we clean up the highly po- tent greenhouse gas emissions from the systems that produce and deliver the fuel," said Jonathan Camuzeaux, EDF senior economy analyst. "Otherwise the net warming effect is actually a negative one for 50 to 90 years after the fuel is burned." Natural Gas Vehicles for America, a developer for market ac- ceptance of natural gas vehicles, was quick to respond. "This study clearly demonstrates that there is a role for natural gas in addressing climate change," said Matthew Godlewski, presi- dent of NGVAmerica. "We welcome all credible insight into paths for improving emissions, yet it's confusing that the Environmental Defense Fund has chosen to conduct and release another study, outside of the cooperative work already underway." Early adopters staying the course Despite the drop in diesel prices, carriers that were on the leading edge of natural gas adoption are finding ways to remain successful. Dillon Transport, a 400-truck tank carrier based in Burr Ridge, Ill., was one of the first to jump headfirst into the natural gas market. The tank carrier experimented with both LNG and CNG before ultimately migrating to CNG for its daycab operations. The key to success in a low-cost diesel environment is to keep the trucks on the road, says Phil Crofts, marketing manager. "You always strive to get the highest-mileage lanes to get the quickest payback," says Crofts. "We want to run those trucks 1,000 miles per day if we can." Crofts explains how the math works. "Let's say you can save $1.50 gallon in CNG vs. diesel and you run 300,000 miles per year and get 6 miles per gallon – that's 50,000 gallons," he says. "At $1.50 per gallon in savings, the payback is pretty significant. If the gap between diesel and CNG lessens to $1.20, then the payback obvi- ously gets extended." Curt Reitz, president of Contract Transport Services, a dedi- cated and regional carrier based in Green Bay, Wis., calculates his company's return on investment for its natural gas trucks based on the tank package. "I don't think anyone knows what the residual value is on a natural gas truck with a 12-liter engine because they are so new," said Reitz during the American Trucking Associations' "Using CNG in a Low Cost Diesel Environment" webinar in April. "If you scrapped the truck and moved the tanks to the next truck you buy, you get to use those tanks for up to 20 years as long as there's no damage," Reitz said. "We look at ROI being 300,000 miles, which in our case is 18 months because we slip-seat and av- Penske Truck Leasing recently was awarded a $400,000 grant from the U.S. Department of Energy to support the company's Alterna- tive Fuel Vehicle Demonstration and Enhanced Driver Experience Project. Penske will use the funds to introduce CNG tractors to customers in Wisconsin, Maryland and Louisiana.