Using natural gas

Here’s a promising story for the U.S. economy.

The figure below plots the price of crude oil in dollars per barrel and the price of natural gas on an equivalent BTU basis. Historically, the two prices had tended to stay fairly close together. But they began to diverge significantly in 2006. Even with the recent easing in oil prices, today you’d have to pay over $14 to get a million BTU in the form of crude oil, but only $2.30 if you were willing to use natural gas as an alternative.



Black line: price of crude oil (West Texas Intermediate, dollars per barrel, end of month values, from FRED). Green line: 5.8 times price of natural gas (Henry Hub Gulf Coast spot, dollars per million BTU, end of month values, from EIA).
n_gas_oil_jun_12.gif



That’s a lot of incentive to try to use natural gas for more of what we do with oil. And people are responding to those incentives. For example,

Westport Innovations Inc.
issued the following press release last week:

Westport Innovations Inc. (WPRT), a global leader in natural gas engines, has signed agreements with Caterpillar Inc. (CAT) to co-develop natural gas technology for off-road equipment, including mining trucks and locomotives. Caterpillar and Westport will combine technologies and expertise, including Westport (TM) High Pressure Direct Injection (HPDI) technology and Caterpillar’s industry leading off-road engine and machine product technology, to develop the natural gas fuel system. Caterpillar will fund the development program….

While the agreements initially focus on engines used in mining trucks and locomotives, the companies will also develop natural gas technology for Caterpillar’s off-road engines, which are used in a variety of electric power, industrial, machine, marine and petroleum applications worldwide….

Development programs will start immediately for both new and existing engines, combustion technology and fuel systems. Commercial production is expected to begin in about five years.

Producing and finding ways to use natural gas may be the most promising answer to the question I posed last year of what could America be good at? Consider also this report last week from Business Week:

Exxon Mobil Corp. (XOM) … plans to build factories that produce ethylene and plastics in Texas, joining a growing group of competitors racing to use U.S. natural gas to make chemicals.

A new plant at the company’s site in Baytown would produce 1.5 million metric tons of ethylene annually starting in 2016, pending regulatory approvals…

The Houston-area plants would “significantly” increase exports of plastics, Exxon said in the statement. Chevron Phillips Chemical Co. is planning a $5 billion ethylene project at its Baytown site and Dow Chemical Co. (DOW) is also expanding to use more gas-based raw materials that provide a cost advantage over oil-based production in Europe and Asia.

And if America can’t figure out how to use our natural gas, other countries can. Two weeks earlier, Reuters carried this story:


Energy companies announced two multibillion-dollar North American liquefied natural gas export plants on [May 15], adding to a lengthening list of projects aimed at shipping surplus gas overseas to take advantage of more lucrative markets.

Excelerate Energy, the U.S. liquefied natural gas company founded by Oklahoma billionaire George Kaiser, plans to develop the country’s first floating LNG export plant off the Gulf Coast, while Royal Dutch Shell (RDSA) has partnered with Asian buyers to build a plant in western Canada.

Though once again there’s a key U.S. sector that seems to be slower to recognize the new opportunities:

Despite the strong case to allow natural gas exports, the U.S. government is proceeding cautiously with the issue. The topic is seen as being politically sensitive and no decision is expected before the November elections.

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50 thoughts on “Using natural gas

  1. Bob_in_MA

    What’s amazing is how much low-hanging fruit there is. Here, in Massachusetts, there are an incredible number of people who are on the gas grid but still heat with oil. One of our neighbors actually installed a new oil burner last year (doh!).
    If the grid were expanded, there is even greater potential.

  2. VangelV

    I am sorry to spoil the party but the math simply does not work. Natural gas supplies are very high right now because shale producers have to keep producing. If they stop many of the companies have to write down the lease values and would go into bankruptcy. Obviously that is something that the producer management groups do not wish to have happen and are adding more and more debt even as the real production data is showing that EURs are too high and indicating that shale gas is not economic at under $7.50 even in the core areas of the good formations.
    The solution may seen to be an increase in price but that kills the argument above. And there is no way to take a very inefficient process like tight gas production in shale formations and try to develop an export market. Once the costs of liquefaction are added the process is not competitive with alternatives.

  3. Bruce Hall

    One area, of course, where the government is not “proceeding cautiously” is regulation. The EPA is on the forefront of that effort, but in this case it appears that they are being “politically sensitive” to the public backlash that would occur if they turned around the recent decline in natural gas prices with a coal-like approach.
    The New York Times reported:
    The American Petroleum Institute, which had lobbied to weaken the proposed rule, said the revised standards issued Wednesday were an improvement over the original proposal. Howard Feldman, the institute’s director of regulatory and scientific affairs, said the industry had already adopted many of the requirements of the new rule and welcomed the delay in its effective date.
    “The industry has led efforts to reduce emissions by developing new technologies that were adopted in the rule,” Mr. Feldman said. “E.P.A. has made some improvement in the rules that allow our companies to continue reducing emissions while producing the oil and natural gas our country needs.”
    Other industry groups were less generous. The Western Energy Alliance, a group of independent oil and gas companies, said the new rule’s costs far outweighed its benefits and accused the E.P.A. of using the Clean Air Act illegally to deal with global warming.

    http://www.nytimes.com/2012/04/19/science/earth/epa-caps-emissions-at-gas-and-oil-wells.html?_r=1&pagewanted=all
    I guess we well see in 3 years when the rules are in effect what the natural gas prices will be as a result.

  4. jonathan

    To be clear, the government inaction in this case is not the EPA. It’s about the politics of exporting when we’re a net energy importer. The objections to this come as much, if not more, from the GOP side of the debate as from the Democrats.
    I have no problem with the EPA making sure that drinking water isn’t contaminated. We should expect caution in that case.
    I can’t see why exporting is about anything other than politics.

  5. 2slugbaits

    There is a significant downside to natural gas in that lax regulation and lack of regulation at the wellhead could accelerate global warming because of methane leaking into the atmosphere. Methane as a greenhouse gas is many, many times more potent than CO2. But the good news is that controlling leaks at the surface is not technically difficult. It just costs a few bucks. So this comes down to a willingness to accept the relatively small cost of sealing off leaks. Sounds like the perfect case for an effluent tax on natural gas leakages at the wellhead.

  6. bmz

    The obstacle is simply the Republican party who has taken the view that what’s good for the USA is bad for it. Just recently they filibustered an act that would have used our natural gas abundance to enable us to become energy independent.

  7. Lord

    Exports don’t make much sense when 40% of the energy is wasted in liquifaction/gasification and there are so many other more productive uses for it like value added products.

  8. Jeffrey J. Brown

    I believe that the US is still a net natural gas importer, and as I have previously noted, when we look at the actual Texas production data compiled by the Texas RRC, in lieu of the EIA estimates, the oil & gas production picture is not so rosy in the US.
    For example, the most recent RRC data show that Texas monthly natural gas well production fell by 20% from January, 2009 to January, 2012, and the data show an annual natural gas well production peak in 2008 in Texas, with annual production falling from 2008 to 2011.
    If we substitute RRC data for Texas crude oil production data, instead of the EIA data for Texas (while using EIA data for other US producing regions), there was no increase in US crude oil production from 2010 to 2011, despite a huge increase in the number of rigs devoted to drilling for oil in the US.
    Again using the RRC data for Texas crude oil production, the data suggest that annual US crude oil production in 2011 was only back to the 2004 production rate. It other words, it appears that the cumulative expenditures by the US oil industry for 2005 to 2011 inclusive only served to bring us back up to the pre-hurricane production rate that we saw in 2004.
    Our analysis suggests that at best we may only see a slow increase in US oil and gas production–especially if we use actual production data in lieu of EIA estimates. This is not to discount the critical importance of domestic US oil and gas production, but again our analysis suggests that the critical new energy reality facing the US is that we are still dependent on imports for about 60% of the crude oil processed in US refineries, while we have seen an ongoing decline in global net exports of oil, with the developing countries, led by China and India, consuming an increasing share of a declining volume of global net exports of oil.

  9. bmz

    Jeffrey: As I’ve tried to explain to you before, long term import contracts still exist(signed long ago); but everyone with skin in the game recognizes our current and future abundance of natural gas. You are correct that we can never produce our way to oil abundance; but if it were not for the Republicans, we could use natural gas to become energy independent within one decade.

  10. Steven Kopits

    We put marginal costs of shale gas at $5.50 / mmbtu, full cycle costs at near $8 / mmbtu. Thus, I agree with VangelV, that current low prices are unlikely to last. Having said that, $8 / mmbtu is not a tragedy in the least, and right now it looks like there’s a largely supply at this price level–which is still highly competitive around the globe.
    As for LNG exports: $8 + $4 liquefaction and trasportation = $12 / mmbtu for LNG exports to, say, Britain, where LNG is in the $10-12 / mmbtu range last I looked. The business might work, but it doesn’t leap off the page at you. So I am guardedly with the skeptics wrt to US LNG exports.
    FLNG is the Gulf of Mexico? There’s a lot of stranded gas there. It might work if you export it somewhere. But again, it doesn’t leap off the page at me.
    Now, CNG for transport, there’s a market. To fill your car with nat gas at wholesale prices, it would cost $5. Not per gallon. For the whole tank.
    At retail, that fill up with CNG would cost about $35 versus $70 with gasoline. That’s a huge savings for the consumer.
    But also, it’s a huge profit for the retailer. For the retailer, the profit margin (EBITDA) would be on the order of $30 per fill-up. Currently retailing profit is maybe $1 for gasoline and $1 for the associated convenience store per fill-up. So if CNG comprised 10% of fuel sales, 10% * $30 = $3 per fill-up, or 60% of retailing profits.
    So what does the math tell us we should do with our natural gas resources?

  11. Steven Kopits

    Slugs –
    Methane is indeed a potent greenhouse gas, but it decomposes into CO2 over time. It’s only a transient contributor to greenhouse. The total volume of methane in the atmosphere is a very small fraction of the volume of CO2.

  12. Steven Kopits

    BMZ –
    I have no idea what you mean by Republicans being against natural gas. They have supported fracking and the energy industry. Politically speaking, no one is all that thrilled about exporting nat gas, as it would tend to raise US prices to international levels.
    Even Republicans have constituents.

  13. Steven Kopits

    Bob in MA –
    There is indeed a very high reliance on oil for heat in New England. If I were going to do an entrepreneurial company up there, this would be right on the top of my list.

  14. CoRev

    Since 2slugs thinks that we are seeing global warming, this is what UK Met Office – Hadley Center – Climate Research Unit (CRU) charts: http://www.metoffice.gov.uk/hadobs/crutem3/diagnostics/global/nh+sh/annual_bar.png
    Or we can look at a chart with error bars: http://wattsupwiththat.files.wordpress.com/2012/06/monthly.png?w=578&h=396
    The planet has gone through multiple warmer periods just within this interglacial. The Holocene Climate Optimum(HCO), Minoan, Roman, and medieval warm periods were all warmer than today. Each successive warm period since the HCO has been lower than the previous.

  15. Roberto

    The chart posted by Mr. Hamilton would have been better if it had included the prices for a barrel of NGLs, which is probably closer to the $50/$55 mark. This would have also helped clarified why producers keep drilling for natural gas in the face of apparent negative economics. It would have also demystified the notion that producers need to keep going just to conserve leases keeping some kind of bubble intact.
    Together with natural gas it is common to find ethane, propane, butane and iso-butane. All of which are called natural gas liquids. Separating these latter ones from raw natural gas helps obtain methane which is what is transported to our homes through pipes, roughly speaking.
    There is usually a spread between the prices of pure natural gas and the price of the liquids. The larger the spread, the more incentive producers have to drill for gas and separate the liquids. The spread happens because some of the liquids, notably propane and ethane, can replace naphtha and other crude derivatives in petrochemical processes. As such, liquids tend to follow the price of oil as opposed to the price of natural gas.
    There is also a spread between prices for oil and the liquids themselves. So the correlation is not perfect. One can argue overproduction as the cause for recent weakness and widening of the spread. However, international demand for US propane has been very strong and getting stronger with problems filling capacity.
    In addition to competitive exports, it is estimated that the petrochemical industry has been in frank revival given the lower raw material costs (use of ethane instead of crude derivatives) so it is possible that the US will continue to see production growth of natural gas (and processing for the liquids) well into the future. Please excuse the typos.

  16. Jeffrey J. Brown

    bmz,
    The RRC shows that Texas natural gas well production peaked in 2008, when spot natural gas prices hit their (so far) all time annual record high.
    As noted above, the RRC, which sums the reports from Texas producers in order to generate production reports, shows that annual Texas natural gas well production has been declining since 2008, with monthly Texas natural gas well production down by 20% from January, 2009 to January, 2012.
    Here is the link to the RRC data, for recent years and month, which the RRC periodically updates:
    http://www.rrc.state.tx.us/data/production/ogismcon.pdf
    I think that the US oil & gas industry is making a huge mistake in making wildly overoptimistic projections regarding future US oil & gas production, but in any case you are certainly not alone in believing that the sum of the output of discrete producing regions like Texas will result in a virtually infinite rate of increase in production.

  17. Jeffrey J. Brown

    Steven:
    “Politically speaking, no one is all that thrilled about exporting nat gas, as it would tend to raise US prices to international levels.”
    I think that you see my point about why some consumers are more equal than others, to-wit, even without subsidies, domestic consumption tends to be satisfied before a product is exported.
    Our data base shows that for every barrel of consumption in the top 33 net oil exporting countries in 2005 there were 3.7 barrels of production in the top 33 countries. This top 33 production to consumption (P/C) ratio was down to 3.2 in 2010.
    At a one to one P/C ratio, Global Net Exports of oil (GNE) would be zero, but a one to one ratio is where the data trend is headed, with the Chindia region consuming an increasing share of a declining volume of GNE.
    Incidentally, I estimate that Saudi Arabia’s P/C ratio fell from 5.6 in 2005 to 3.6 in 2011 (BP data base, total petroleum liquids).
    My guess is that perhaps 0.1% of the people in the world have some kind of grasp of what is going on in global net export markets.

  18. VangelV

    As for LNG exports: $8 + $4 liquefaction and trasportation = $12 / mmbtu for LNG exports to, say, Britain, where LNG is in the $10-12 / mmbtu range last I looked. The business might work, but it doesn’t leap off the page at you. So I am guardedly with the skeptics wrt to US LNG exports.
    But the math still does not work. In order for you to export you have to move away from the core areas of the best shale formations and start drilling indiscriminately. That means that prices will explode as the low hanging fruit is gone and in order to grow production you need to replace depletion that is running north of 75% per year and the incremental production. This means that you will need more and more drill crews and more and more oil services at a time when companies in the services industry and its supply chain vendors are having trouble attracting competent employees at a reasonable salary structure.

  19. Walter Sobchak

    “Politically speaking, no one is all that thrilled about exporting nat gas, as it would tend to raise US prices to international levels.”
    Only American can believe that they can run up the biggest national debt in history and not have to export anything to service or pay it.

  20. Steven Kopits

    VangelV –
    I think there’s probably a pretty solid base out there at $8. But if you want to go to $12 / mmbtu, then you have MacKenzie River, Prudhoe Bay, Shtokman, and plenty of stranded offshore fields around the globe. Prudhoe Bay alone, for example, has 1.5x US annual nat gas consumption–and it’s known and readily accessible. It’s just a price thing.
    So, yes, $2.50 / mmbtu is low. But passing through $8, there are quite a few sources out there.

  21. JDH

    Steven Kopits and Vangel: Don’t forget that natural gas plant liquids are part of the return from producing natural gas. Also, it is the price of natural gas relative to oil, not the absolute price, that will drive these considerations.

    Roberto: My focus here is on the consumer economics, not the producer economics. Topic here is the very low price for which the end user can obtain methane, which low price is, as just noted, partly a function of the return to producers from the denser hydrocarbons. That low price is an incentive for people to make more use of the methane.

  22. JimT

    James Hamilton wrote:

    Though once again there’s a key U.S. sector that seems to be slower to recognize the new opportunities:

    Despite the strong case to allow natural gas exports, the U.S. government is proceeding cautiously with the issue. The topic is seen as being politically sensitive and no decision is expected before the November elections.



    But who needs to wait for a permit? The linked article also states:

    Currently, companies are required to seek permits to export gas to countries that do not have free trade agreements with the U.S.

    What countries are prohibited? Iran? Venezuela?

  23. Jeffrey J. Brown

    bmz,
    Actually, the absolute Texas peak, for both crude oil and natural gas, was in 1972, but I was of course talking about a secondary peak, in the context of the “Shale Revolution.”
    In any case, Texas natural gas production, from both gas wells and from associated gas, represents a significant portion of total US production, and if the Shale Play Model does not work for Texas natural gas wells, why would it work across the country for total oil and natural gas production? And in fact as noted above, if we simply substitute Texas RRC data for Texas crude oil production, instead of using EIA estimates (and use the EIA for the rest of the country), a thousand rigs drilling for oil in the US in 2011 resulted in a net increase of zero bpd per drilling rig per year.
    Finally, when you talk about those with “skin in the game,” it’s certainly true that the shale players have a strong financial incentive to exaggerate the productive potential of shale plays. For example, when Chesapeake paid $180 million dollars for a lease on the DFW Airport property, in the Barnett Shale Play, they claimed that the URR from the lease would be about 1,000 BCF. It appears that the actual URR will be about 100 BCF.

  24. ppcm

    The IEA monthly report as of May P24 US energy market
    A noticeable expected Increase in oil production of oil 2011 2013 and a noticeable, steady electricity consumption in a one year time frame. The natural gas report magnifies the increasing stocks in natural gas but still the monthly bulletin shows a natural gas price forecast by 2013 increased by 27.5 %.
    Included in the mainframe report an additional paper “Market Prices and Uncertainty Report”. Within very few months the gas price volatility is driven from 40% to 20%,the price of the natural gas in a less than a year brought from 4 $ MMBtu to 2$ in April 2012.Industrial consumers and private may wish to know more than reading the actual price.
    http://www.eia.gov/forecasts/steo/uncertainty/index.cfm

  25. dick c

    This issue would hardly register for anyone whose fortune wasn’t tied to oil or gas if the U.S. wasn’t so far out of step with the rest of humanity.
    http://data.worldbank.org/indicator/IS.ROD.SGAS.PC
    Doesn’t this boils down to a preference for a particular flavor of poison? We concentrate our attention on this while Germany is close to generating half it’s electricity from renewable resources and is building homes that can be heated with a hairdryer.

  26. Buzzcut

    How does GTL Diesel costs compare to LNG? Distillate prices in the US are still strong, doesn’t it make more sense to convert natural gas to GTL Diesel rather than export it as LNG?
    When are M85 (methanol) vehicles going to make a comback? There were a few in the early 90’s, but E85 (ethanol) outcompeted it in the field of lobbying (hard to beat the agriculture lobby!)
    Doesn’t methanol make more sense for OTR trucks than compressed natural gas?

  27. Steven Kopits

    GTL looses of lot of gas in conversion. Shell claims a 25% loss in their Pearl GTL plant in Qatar. The plant is the biggest in the world.
    Shell’s other plant in Bintulu, Malaysia is reckoned to have nat gas conversion losses on the order of 40-50%.
    Although I calculated the payback period on the Pearl GTL plant at three years (!), Shell was still criticized because they would have made even more had it been a simple LNG facility.
    So, GTL is good in theory. In practice, the conversion losses are high and such plants require very large, consistent sources of natural gas. For example, the Pearl GTL plants consumes a volume of natural gas equal to 2% of US consumption. That’s a lot.

  28. VangelV

    VangelV –
    I think there’s probably a pretty solid base out there at $8. But if you want to go to $12 / mmbtu, then you have MacKenzie River, Prudhoe Bay, Shtokman, and plenty of stranded offshore fields around the globe. Prudhoe Bay alone, for example, has 1.5x US annual nat gas consumption–and it’s known and readily accessible. It’s just a price thing.
    So, yes, $2.50 / mmbtu is low. But passing through $8, there are quite a few sources out there.

    Since I have invested in MacKenzie River royalties (valued at $0) I certainly hope that we will get new supplies. And I am certainly aware that Mexico and most OPEC nations should have a great deal of conventional natural gas fields yet to be discovered.
    The problem is that those sources do not help the narrative that is provided above. All of these facilities being planned with assumptions of cheap natural gas will either be big white elephants or will not be as profitable as imagined. Malinvestments are harmful to the economy no matter how desperate people may be for hope of new capital investment. What we need are properly functioning markets that are based on small government and sound money, not a hampered marketplace in which a central bank is free to print as much as it wishes.

  29. VangelV

    Doesn’t this boils down to a preference for a particular flavor of poison? We concentrate our attention on this while Germany is close to generating half it’s electricity from renewable resources and is building homes that can be heated with a hairdryer.
    Germany has already admitted that its renewables policy has failed miserably. Unless you want to do great harm to consumers and the real economy I see no reason to make the same errors as the Europeans.

  30. aaron

    I think many people stll aren’t getting JDH’s point. As companies produce the tech to use NG, the price will move toward the $/btu value of oil. This will make LNG economical.

  31. d_rumsfeld

    -Steven
    The atmospheric residence time of methane (about 7 years) is included in its global warming potential, which is normalized over a time-span of 20, 100, or 500 years. Even at 500 years, a molecule of methane is more than 7 times more potent at absorbing in the infrared than a molecule of carbon dioxide. If you go for a 20 year value, methane is more than 70 times more potent than carbon dioxide.
    See http://en.wikipedia.org/wiki/Global-warming_potential

  32. tj

    Germany is close to generating half it’s electricity from renewable resources and is building homes that can be heated with a hairdryer
    Yes, it works great in the summer, but the only thing your hair dryer is good for in the winter is thawing your frozen pipes ;)

  33. ivars

    My wife herenin a country that imports gas drives Subaru outback for 2 years on LNG and has no complaints about paying 60% less at the pump for a full tank equivalent.

  34. JBH

    Bmz posts that Republicans are obstructing the use of our vast natural gas resources to keep us from becoming energy independent.

    Kopits says, “I have no idea what you mean by Republicans being against natural gas.” [I myself wondered the same thing. And so followed up on this surprising statement.]

    Bmz replies with a link to support his claim. The link is an article on how in March Senate Republicans defeated an amendment to subsidize the development of switchover technology for heavy duty trucks and buses from diesel to natural gas to then be funded by a user tax on the vehicles. (Shades of perpetual motion.) The article leads to a link giving the vote by Senator and the remarks on the floor right before the vote was cast: http://thomas.loc.gov/cgi-bin/query/F?r112:1:./temp/~r112yTbDIe:e42281:

    A clear strain running through the posts here is that, as production and technology evolve, the market will move natural gas prices toward the energy equivalent price of crude. If so, as Aaron correctly points out [the exportation of] LNG will then become economical. And so on.

    Throughout this thread, then, there is an implicit belief in the workings of the market. Hidden though it be, it touches nearly every point being made. The entire tenor of this thread would be something else entirely without it. The time-tested notion of letting the market work controverts, at a deep level, the very argument Bmz makes in castigating Republicans on the technology issue. Republicans appreciate the societal function of the market, and do not want yet more iron glove of regulation over the invisible hand, which more often than not leads straight to unintended consequences. And for sure to favoritism and corruption that accompany redistribution (Solyndra).

    The issue is this. Should the marketplace or the government determine the speed of adoption (not the direction since that is a given) at which new natural gas technology (or any other technology) will come to the marketplace? Generations of economists pronounced the verdict long ago. The market is the most efficient allocator of resources. Nothing has yet been discovered that is better, though multitudes toil daily honestly believing they in their small part of the universe know better. If it is 1961 and a Russian orbits the earth we have grounds (trumping those of allocative efficiency) for jump-starting a space program for which the private sector has no incentive. Similarly if there is plutonium over there behind the tree. Such is not the case here, though, and rarely ever is. If you look at the vote on the amendment, it split not between oil-rich and oil-poor states, but down a line separating belief systems about the efficacy of the market. This blog is a microcosm of that split and it is no wonder our citizenry are confused and ill-informed.

  35. Ulenspiegel

    tj wrote: “Yes, it works great in the summer, but the only thing your hair dryer is good for in the winter is thawing your frozen pipes ;)”
    Try to understand the Passivhaus concept :-)
    It works very well as thousands of built houses show.
    Why should there be any problems with pipes in a highly insulated building? This is not possible from a physical point of view.
    VangelV wrote: “Germany has already admitted that its renewables policy has failed miserably.”
    Any serious sources for this statement?

  36. bmz

    JBH: “A clear strain running through the posts here is that, as production and technology evolve, the market will move natural gas prices toward the energy equivalent price of crude. If so, as Aaron correctly points out [the exportation of] LNG will then become economical. And so on.”
    You are twice wrong: 1) they are not the same markets; and 2) as natural gas prices moves towards oil, exportation of LNG becomes LESS, NOT MORE, economical.
    “Republicans appreciate the societal function of the market”
    That depends entirely on who gets the subsidy. When oil prices were lower, Bush pushed through a tax subsidy for domestic oil producers that was supposed to be phased out after oil hit $50/barrel. Republicans are now defending this subsidy to the death (of working Americans, not Republicans).
    “Shades of perpetual motion”
    Unlike tax reductions that pay for themselves.
    “Generations of economists pronounced the verdict long ago. The market is the most efficient allocator of resources”
    I suppose that is why we have the world’s least socialist AND efficient medical system.
    “This blog is a microcosm of that split and it is no wonder our citizenry are confused and ill-informed.”
    There is nothing I have said which could confuse citizens; just the opposite,for the last 50 years, Republicans have talked the talk on energy independence; but, when given the chance to walk the walk, they simply follow the money–as they always do. Sorry, JBH; but to quote a famous economist,”Republicans lie all the time [at least regarding energy].”

  37. EVO

    SK – “Now, CNG for transport, there’s a market. To fill your car with nat gas [..] at retail, that fill up with CNG would cost about $35 versus $70 with gasoline. That’s a huge savings for the consumer. But also, it’s a huge profit for the retailer. For the retailer, the profit margin (EBITDA) would be on the order of $30 per fill-up. Currently retailing profit is maybe $1 for gasoline and $1 for the associated convenience store per fill-up. So if CNG comprised 10% of fuel sales, 10% * $30 = $3 per fill-up, or 60% of retailing profits.

    So what does the math tell us we should do with our natural gas resources?”

    http://idealab.talkingpointsmemo.com/2012/06/national-laboratory-pivots-from-electric-to-natural-gas-vehicles.php

    The math tells us to run the nat gas much more efficiently and cheaply in co-gen turbines for power to then put that energy through a plug into our plug-in hybrids, the ultimate flex-fuel vehicles. That’s a much cheaper, easier, more efficient and safer way to get nat gas into vehicles than converting engines and vehicles to nat gas plus energy intensive and cost intensive compression of nat gas multiple times plus building very expensive CNG filling stations.

    Which type of station dominates in numbers already?

    http://www.afdc.energy.gov/afdc/fuels/stations_counts.html

    If nat gas as a direct vehicle fuel really makes that much sense, that just means we’ll see more plug-in nat gas hybrids produced sooner than later.

    SK’s inefficient, expensive way to get nat gas into a vehicle will simply drive up nat gas prices faster to make it less competitive with gasoline again sooner, while a plug is always sustainable from whatever easily and relatively cheaply changeable energy mix you deem best at any time.

  38. aaron

    “as natural gas prices moves towards oil, exportation of LNG becomes LESS, NOT MORE, economical.”
    Please explain.
    Why would the cost of liquification and transportation climb so much faster than price?

  39. bmz

    EVO:
    Your citation: http://idealab.talkingpointsmemo.com/2012/06/national-laboratory-pivots-from-electric-to-natural-gas-vehicles.php , says:
    “Only about 17,000 out of 12.8 million [vehicles] sold in 2011 were Leafs and Volts,” Duoba told TPM, also noting that: “At least for some time, compared to plug-in vehicle batteries, CNG storage offers lower weight, higher energy storage and lower costs – as well as faster refueling/recharging.”
    ” the Department of Energy [states] that the average annual emissions per all-electric vehicle is 8035 pounds of carbon dioxide (CO2) equivalent. … while CNG vehicles “can produce significantly lower amounts of harmful emissions,”

  40. bmz

    EVO:
    Your citation: http://idealab.talkingpointsmemo.com/2012/06/national-laboratory-pivots-from-electric-to-natural-gas-vehicles.php , says:
    “Only about 17,000 out of 12.8 million [vehicles] sold in 2011 were Leafs and Volts,” Duoba told TPM, also noting that: “At least for some time, compared to plug-in vehicle batteries, CNG storage offers lower weight, higher energy storage and lower costs – as well as faster refueling/recharging.”
    ” the Department of Energy [states] that the average annual emissions per all-electric vehicle is 8035 pounds of carbon dioxide (CO2) equivalent. … while CNG vehicles “can produce significantly lower amounts of harmful emissions,”

  41. EVO

    BMZ
    1. CNG at vehicle offers those relative storage only benefits by using nat gas very expensively and very inefficiently relative to a plug, which will drive up the price of nat gas sooner and so become self limiting. That was my point.
    2. You might look at the margin instead of the average:
    http://sunetric.com/_assets/Documents/2010_11_24_KingWindwardNissan_Goes_Solar.pdf
    Where, when and how you top off your plug-in (and use it) matters, if emmissions is what you care about and not just maximum torque off the line, instant reponsiveness and total smoothness.
    Argonne is not discarding plug-ins, esp. hybrids. They are simply recognizing that CNG has some storage benefits relative to current gen batteries and that raw nat gas is cleaner than gasoline and is dirt cheap … for now.
    SK
    Yes, there are infinite configurations possible. We are still in the baby days.

  42. Bill Ferree

    Thermal efficiency: natural gas at distribution line pressure to energy at the electric car’s wheels–45% more or less. NG at line pressure to the wheels of the CNG car–15% more or less.
    Please join discussion of related subjects @wattnextblog.wordpress.com

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