Note from John Kemp at Reuters: "U.S. SANCTIONS on Venezuela’s oil exports have pushed prices for Mars (a medium-density crude) to a rare premium over Louisiana Light Sweet as refiners struggle to source enough diesel-rich medium and heavy crude oils."
John is one of the top energy sector analysts at Reuters. He is based in London.
Diesel Prices may be going way up
Diesel Prices may be going way up
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Diesel Prices may be going way up
If the price of diesel goes much higher, a lot more truck fleets will convert to natural gas (CNG and LNG). Read this.
It also points out that all the hype about EVs just might be a bit overblown.
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NatGas vehicle fuel is alive and well, but lives deep in the shadow of sexier EV headlines
UPS is making a $100-million investment in natural gas transportation each year
From FreightWaves
If you’ve missed the headlines lately, electric vehicles (EVs) are coming, and they are arriving soon. There is an interesting parallel to the hype machine that is pushing electric vehicles as the future of transportation today and the hype machine that pushed another darling fuel just a few years ago, though, offering a cautious tale that must be watched.
In 2011, natural gas was the vehicle fuel of the future. Today, it’s rarely talked about as an alternative to diesel, overshadowed by electric power. What happened?
If you listen to Erik Neandross, CEO of Gladstein, Neandross & Associates (GNA), a consulting firm specializing in alternative fuel vehicles and the organizers of ACT Expo, nothing has happened to natural gas.
“By no means has electric taken over natural gas except in above-the-fold headline coverage,” he told FreightWaves. “Electric is clearly is all the rage; it’s very exciting and what everyone is talking about. It’s very reminiscent of the natural gas craze in the 2011-2012 time frame after everyone found out about shale gas.”
What followed, though, was a collapse of diesel fuel prices. The U.S. Department of Energy’s average retail diesel fuel price for 2011 was $3.84. At that price, the abundance of natural gas made the initial upfront cost in vehicles worth the price. Back in 2014, John Wall, then vice president and chief technical officer for engine maker Cummins (NYSE: CMI), said that even with the higher cost of the trucks themselves, a fleet could save as much as $35,000 per year on fuel using natural gas.
As diesel prices fell over the next several years, that cost advantage disappeared, although that doesn’t mean natural gas vehicles have. Despite a 23 percent year-to-date decline in sales through November 2018, ACT Research noted that natural gas-powered Class 8 truck retail sales rose 13 percent in 2017, and overall natural gas vehicle sales were up 9 percent in 2017.
Natural gas remains a favorite of refuse operators, and is having success in certain operations, including runs from the California ports into Texas and back, Neandross said. It is far from dead as a fuel, even if it is not garnering the headlines that electric is right now.
“We work with a lot of fleets that have made significant investments in natural gas because they have figured it out,” Neandross said. “UPS is still making a $100 million investment in natural gas each year. UPS doesn’t spend $100 million a year in technology that doesn’t work. So, what have they figured out? They’ve figured out how to make it work for them.”
He also pointed to Waste Management and the fact that 60 percent to 65 percent of all new refuse industry vehicles sold, based on estimates, are powered by natural gas. Overall, natural gas can still reduce operational costs by 30 percent in some applications.
Natural gas may have an ally in the Environmental Protection Agency’s announcement last year that it would revisit and potentially lower oxides of nitrogen (NOx) limits on trucks through its Cleaner Trucks Initiative (CTI). Current NOx levels are set at 0.20 grams per brake horsepower per hour. The California Air Resources Board (CARB) has led a coalition of states and clean air groups in pushing EPA to revise and lower NOx limits, citing technologies that are now available that can further decrease the emissions. CARB has pushed for a 90 percent reduction in NOx. Interestingly, NGVAmerica, which advocates for natural gas vehicles, said that natural gas Class 8 tractors reduce NOx by 90 percent compared to today’s diesel engines.
EVs could potentially do the same thing, though, and right now, that is what is generating the headlines.
Natural gas vehicles are yesterday’s news, but just as viable as ever
“Natural gas is kind of yesterday’s news; people just don’t get excited about it,” Neandross said. “The price of fuel in 2011, 2012 and 2013, when oil was up at $100-plus a barrel, [made natural gas] very, very motivating. And you would think that the [lower] price of diesel being what it is today would have a proportional negative impact. But frankly, what I see is the interest [remains].”
Navigant Research has previously found that by 2022, nearly 400,000 natural gas-powered trucks and buses would be in operation globally, up from 170,000 in 2013. By comparison, Navigant said there were only 31,000 electric trucks sold globally in 2016, and that figure is expected to rise to just over 100,000 by 2020, with compound annual growth globally of both medium- and heavy-duty trucks about 9 percent through 2030.
Neandross said that fleets continue to look at natural gas-powered vehicles, it’s just that “there are a lot of toys on the shelf, there is a lot to play with.” He added that there has been one change in the reasoning to adopt natural gas. “Five or 10 years ago, it was more fuel economics-driven and now corporate sustainability is playing a more significant role, and even overshadowing the fuel [impact in some cases],” Neandross said.
Neandross is not only a supporter of natural gas, he also is a proponent of EVs. He is actively involved in a number of alternative fuel organizations, serving as vice chair of the Electric Vehicle Subcommittee of the Santa Monica Task Force on the Environment, and as chair of the Board of Directors of the Coalition for Clean Air.
When it comes to electric vehicles, Neandross sees some of the same questions that have plagued natural gas-powered vehicles: namely range and infrastructure limitations.
“It’s still the bottom half of the first inning in the EV truck ballgame,” Neandross said. “We really have almost no [or very limited] traditional original equipment manufacturer (OEM) [electric] technology on the road. It’s just way too early to make any grand conclusions that EVs have won, that electric is here to stay.”
Neandross pointed to the craze for everything electric, noting that it is similar to what natural gas was going through in its early days. “We’re seeing that same sort of enthusiasm for electric trucks, everyone wants one; it’s going to save us from the woes of diesel,” he said. “[Infrastructure] is slow to develop and it is going to take time. And that infrastructure has to factor into the total cost of ownership.”
Fleets looking at EVs will likely learn some of the lessons that early natural gas adopters learned. “One of the pushbacks we’ve heard from [fleets using natural gas] is that they have to be able to deploy the asset [where it needs to be], and we are getting right back to that same discussion now with electric trucks,” Neandross said.
Another big factor that slowed natural gas adoption was residual values. Because fleets turn over vehicles in specified timeframes, often three to five years, they want to ensure they are receiving proper value for those vehicles.
“The residual market’s reaction to natural gas was not very receptive,” Neandross said. “The residual value was [critical] to killing many projects. Admittedly, that may have been an excuse ….We’re going to see all those questions again with electric. Unlike the consumer EV market, the commercial EV market cares about those things.”
One positive going for the electric market is the number of companies working on the technology. Calling it an “impressive level of investment in electric from Tier One suppliers,” Neandross said it could be a differentiator in the success of electric versus what happened with the slow adoption of natural gas.
Some cost-related red flags for EV fleets: complexity is expensive
There are some warning signs for electric, though. Several conversations with fleets “are suggesting that their fuel costs are actually higher than their diesel costs. And a lot of that is due to the complexity involved in making electric work,” Neandross said. He also pointed out that fleets don’t always properly evaluate the total cost of EV ownership.
“You hope that in an electric operation your fuel cost, your maintenance costs will tend to be lower, but I can say that has not been consistently shown in the early [adoption] fleets,” he said. “There is not enough attention being paid to maximizing the value of EVs based on charging time, charging infrastructure, and assessing off-peak storage rates to get to that point. A lot of the focus at this point is getting the [vehicles] out there.”
Neandross also pointed to another issue that both electric and natural gas are facing: improved diesel engines. “All of these options not only need to meet that six miles per gallon (mpg) diesel bar, but now that diesel bar is nine mpg with all the bells and whistles [on new diesel trucks],” he said. “There are no easy answers, until there are.”
It also points out that all the hype about EVs just might be a bit overblown.
-------------------------------------------------------------------------------
NatGas vehicle fuel is alive and well, but lives deep in the shadow of sexier EV headlines
UPS is making a $100-million investment in natural gas transportation each year
From FreightWaves
If you’ve missed the headlines lately, electric vehicles (EVs) are coming, and they are arriving soon. There is an interesting parallel to the hype machine that is pushing electric vehicles as the future of transportation today and the hype machine that pushed another darling fuel just a few years ago, though, offering a cautious tale that must be watched.
In 2011, natural gas was the vehicle fuel of the future. Today, it’s rarely talked about as an alternative to diesel, overshadowed by electric power. What happened?
If you listen to Erik Neandross, CEO of Gladstein, Neandross & Associates (GNA), a consulting firm specializing in alternative fuel vehicles and the organizers of ACT Expo, nothing has happened to natural gas.
“By no means has electric taken over natural gas except in above-the-fold headline coverage,” he told FreightWaves. “Electric is clearly is all the rage; it’s very exciting and what everyone is talking about. It’s very reminiscent of the natural gas craze in the 2011-2012 time frame after everyone found out about shale gas.”
What followed, though, was a collapse of diesel fuel prices. The U.S. Department of Energy’s average retail diesel fuel price for 2011 was $3.84. At that price, the abundance of natural gas made the initial upfront cost in vehicles worth the price. Back in 2014, John Wall, then vice president and chief technical officer for engine maker Cummins (NYSE: CMI), said that even with the higher cost of the trucks themselves, a fleet could save as much as $35,000 per year on fuel using natural gas.
As diesel prices fell over the next several years, that cost advantage disappeared, although that doesn’t mean natural gas vehicles have. Despite a 23 percent year-to-date decline in sales through November 2018, ACT Research noted that natural gas-powered Class 8 truck retail sales rose 13 percent in 2017, and overall natural gas vehicle sales were up 9 percent in 2017.
Natural gas remains a favorite of refuse operators, and is having success in certain operations, including runs from the California ports into Texas and back, Neandross said. It is far from dead as a fuel, even if it is not garnering the headlines that electric is right now.
“We work with a lot of fleets that have made significant investments in natural gas because they have figured it out,” Neandross said. “UPS is still making a $100 million investment in natural gas each year. UPS doesn’t spend $100 million a year in technology that doesn’t work. So, what have they figured out? They’ve figured out how to make it work for them.”
He also pointed to Waste Management and the fact that 60 percent to 65 percent of all new refuse industry vehicles sold, based on estimates, are powered by natural gas. Overall, natural gas can still reduce operational costs by 30 percent in some applications.
Natural gas may have an ally in the Environmental Protection Agency’s announcement last year that it would revisit and potentially lower oxides of nitrogen (NOx) limits on trucks through its Cleaner Trucks Initiative (CTI). Current NOx levels are set at 0.20 grams per brake horsepower per hour. The California Air Resources Board (CARB) has led a coalition of states and clean air groups in pushing EPA to revise and lower NOx limits, citing technologies that are now available that can further decrease the emissions. CARB has pushed for a 90 percent reduction in NOx. Interestingly, NGVAmerica, which advocates for natural gas vehicles, said that natural gas Class 8 tractors reduce NOx by 90 percent compared to today’s diesel engines.
EVs could potentially do the same thing, though, and right now, that is what is generating the headlines.
Natural gas vehicles are yesterday’s news, but just as viable as ever
“Natural gas is kind of yesterday’s news; people just don’t get excited about it,” Neandross said. “The price of fuel in 2011, 2012 and 2013, when oil was up at $100-plus a barrel, [made natural gas] very, very motivating. And you would think that the [lower] price of diesel being what it is today would have a proportional negative impact. But frankly, what I see is the interest [remains].”
Navigant Research has previously found that by 2022, nearly 400,000 natural gas-powered trucks and buses would be in operation globally, up from 170,000 in 2013. By comparison, Navigant said there were only 31,000 electric trucks sold globally in 2016, and that figure is expected to rise to just over 100,000 by 2020, with compound annual growth globally of both medium- and heavy-duty trucks about 9 percent through 2030.
Neandross said that fleets continue to look at natural gas-powered vehicles, it’s just that “there are a lot of toys on the shelf, there is a lot to play with.” He added that there has been one change in the reasoning to adopt natural gas. “Five or 10 years ago, it was more fuel economics-driven and now corporate sustainability is playing a more significant role, and even overshadowing the fuel [impact in some cases],” Neandross said.
Neandross is not only a supporter of natural gas, he also is a proponent of EVs. He is actively involved in a number of alternative fuel organizations, serving as vice chair of the Electric Vehicle Subcommittee of the Santa Monica Task Force on the Environment, and as chair of the Board of Directors of the Coalition for Clean Air.
When it comes to electric vehicles, Neandross sees some of the same questions that have plagued natural gas-powered vehicles: namely range and infrastructure limitations.
“It’s still the bottom half of the first inning in the EV truck ballgame,” Neandross said. “We really have almost no [or very limited] traditional original equipment manufacturer (OEM) [electric] technology on the road. It’s just way too early to make any grand conclusions that EVs have won, that electric is here to stay.”
Neandross pointed to the craze for everything electric, noting that it is similar to what natural gas was going through in its early days. “We’re seeing that same sort of enthusiasm for electric trucks, everyone wants one; it’s going to save us from the woes of diesel,” he said. “[Infrastructure] is slow to develop and it is going to take time. And that infrastructure has to factor into the total cost of ownership.”
Fleets looking at EVs will likely learn some of the lessons that early natural gas adopters learned. “One of the pushbacks we’ve heard from [fleets using natural gas] is that they have to be able to deploy the asset [where it needs to be], and we are getting right back to that same discussion now with electric trucks,” Neandross said.
Another big factor that slowed natural gas adoption was residual values. Because fleets turn over vehicles in specified timeframes, often three to five years, they want to ensure they are receiving proper value for those vehicles.
“The residual market’s reaction to natural gas was not very receptive,” Neandross said. “The residual value was [critical] to killing many projects. Admittedly, that may have been an excuse ….We’re going to see all those questions again with electric. Unlike the consumer EV market, the commercial EV market cares about those things.”
One positive going for the electric market is the number of companies working on the technology. Calling it an “impressive level of investment in electric from Tier One suppliers,” Neandross said it could be a differentiator in the success of electric versus what happened with the slow adoption of natural gas.
Some cost-related red flags for EV fleets: complexity is expensive
There are some warning signs for electric, though. Several conversations with fleets “are suggesting that their fuel costs are actually higher than their diesel costs. And a lot of that is due to the complexity involved in making electric work,” Neandross said. He also pointed out that fleets don’t always properly evaluate the total cost of EV ownership.
“You hope that in an electric operation your fuel cost, your maintenance costs will tend to be lower, but I can say that has not been consistently shown in the early [adoption] fleets,” he said. “There is not enough attention being paid to maximizing the value of EVs based on charging time, charging infrastructure, and assessing off-peak storage rates to get to that point. A lot of the focus at this point is getting the [vehicles] out there.”
Neandross also pointed to another issue that both electric and natural gas are facing: improved diesel engines. “All of these options not only need to meet that six miles per gallon (mpg) diesel bar, but now that diesel bar is nine mpg with all the bells and whistles [on new diesel trucks],” he said. “There are no easy answers, until there are.”
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group