Natural Gas as a Transportation Fuel

I've played devil's advocate over the past couple of weeks...

First, by saying that electric cars weren't yet ready for the prime time — at least for the majority of Americans — based purely on the current price of gas and the current price of electric and non-electric cars.

The argument went like this:

The price discrepancy between the all-electric Nissan Leaf and the Nissan Versa (the car the Leaf most resembles) is $15,280. At $3.00 per gallon — which we're currently well below— that would buy you 5,093 gallons of gas.

And with the Versa rated at 34 mpg (I'll use 30 mpg to err on the conservative side), that much gas would allow you to drive 152,800 miles.

So you can buy a Leaf for $25,280 (minimum) and still have to pay for electricity to run it.

Or you could buy a Versa for $10,000 and not reach the break-even cost of a Leaf until you've driven for 153,000 miles.

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In the current market, I'd buy the Versa every time. And unless you have plenty of disposable income, you would, too.

The economics just aren't quite there yet.

I've also said the wind industry needs to adapt or die and highlighted oil opportunities arising as a result of the BP spill.

The main point I've been trying to get across is that you can't make money investing in ideals. Even though we know clean energy is the way forward, we still have to invest in a real-world market.

Real-world solutions

You and I both know it's tough for renewables to compete right now. In many cases, the only projects being completed are those receiving grants, stimulus funds, or some other form of federal or state assistance.

And yes, I know that oil and coal receive subsidies and that their externalized costs are much higher — which, in a perfect world, makes them less competitive.

But we don't live in a perfect world. And ideological debate doesn't pay the bills.

So until those costs are internalized (cap-and-trade, a carbon tax, a gas tax), we have to invest accordingly.

Yet that doesn't mean we don't have access to economically competitive, cleaner alternatives...

Low-hanging fruit

The market wants cheap solutions before expensive ones. That's just a fact of capitalism.

It means we'll make our light bulbs use less energy before we build a new wind plant.

It means we'll deploy more efficient appliances before powering our homes with solar.

It means we'll increase fuel economy standards before switching to electric vehicles.

And right now, there's an industry with rampant waste that's about to get this very treatment...

It's the long-haul trucking industry.

It makes up less than 5% of the vehicles in the country, but it consumes 20% of our transportation fuel. It's the lowest hanging fruit there is.

A trucking company VP recently said, “The 18-wheeler, or freight movement market in general, is definitely the holy grail when it comes to potential energy savings.”

And that's why the trucking industry — and even fleets of smaller vehicles — are switching to natural gas.

Of course, the main reason is because it's cheaper: $1.50 per equivalent gallon to diesel.

But it also burns much cleaner and we have plenty of it here in the states. Some are even calling it the “champagne of fuels.”

It's an economic, real-world energy solution. And for properly positioned investors, it's going to be a windfall.

Mack, Kenworth, Volvo, Peterbilt... they're all offering natural gas big rig models. Honda, Chevy, and Isuzu all offer natural gas models or conversion kits for passenger vehicles.

And Ford just announced it'll offer natural gas variants of its heavy-duty trucks.

Clean Energy Fuels (NASDAQ: CLNE) — a company that builds natural gas fueling stations — has ratcheted higher as the benefits of natural gas as a transportation fuel became evident.

And its going to keep on truckin' as more and more fleets and companies convert.

You might also want to take a look at Waste Management (NYSE: WMI), which not only operates one of the largest natural gas fleets in the country, but is also building a robust business selling gas produced at their landfills.

For even more natural gas profit ideas, you can check out two of my recent posts on our sister site, Energy & Capital, here and here.

And check your inbox tomorrow for a full report on the company about to corner the most lucrative part of this business: making the natural gas engines.

Call it like you see it,

Nick