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Robert Bryce, the managing editor of Energy Tribune is one of my favorite energy thinkers. He is a throwback journalist with an inquiring mind who asks hard questions and really thinks through the answers. He has recently written a book titled Gusher of Lies.

I have not yet had a chance to read the book, but I recently listened to a Tavis Smiley show interview with Robert where he talked a little about one of the topics discussed in the book - the use of natural gas as a vehicle fuel.

This topic caught my interest as my energy obsessed brain began weaving several threads into a new pattern. One thread is the growing disconnect between the cost per unit energy of natural gas compared to diesel fuel in the United States. Another thread is a story that has been playing on my drive time radio station about the challenges that local school districts are facing as they prepare their student transportation budgets in the face of rapid increases in the cost of diesel fuel. The final thread is my continuing belief that new nuclear power plants have a role to play in alleviating our current energy crisis.

Let me try to weave those thread together in a cohesive way. In Europe, oil prices and natural gas prices have a definite linkage, but in the United States there are often market conditions where one fuel develops a significant cost advantage over the other. Such a situation exists today. To compare different energy fuels, we should think about convenience of storage, flexibility in consumption, delivery mechanisms, and cost per unit energy.

The traders have not made that last bit easy, over the many decades that energy fuels have been bought and sold, some rather unusual units have become the standard. Most of us are familiar with diesel or gasoline prices in $/gal, but natural gas trades in a unit that looks really strange the first time you see it - $/MMBTU. MM is the Roman numeral representation of thousand thousand or 1 million. A reasonably accurate thumb rule is that 7 gallons of diesel fuel contains one MMBTU.

If you take a look at one of my most frequently visited web pages - Bloomberg.com: Energy Prices you will find that heating oil - essentially diesel fuel without the taxes and retail mark-up - is trading today for $3.80 per gallon ($26.60 per MMBTU) while natural gas - again without retail mark-ups or taxes - is trading at about $13.00 per MMBTU. In the wholesale market, natural gas is selling at a 50% discount on a cost per unit heat basis compared to diesel fuel.

I work in Washington, DC and live in Annapolis, MD, so I see a LOT of buses every day. In our national capital city, about 1/3 of the 1500 buses run by the Washington Metro Area Transit Authority (WMATA) use Compressed Natural Gas (CNG) as their fuel source while the rest run on diesel fuel.

Most of the CNG buses have entered service within the past 7 years. They have won support from many environmental groups like the NRDC. Of course, not everyone likes CNG buses, people that prefer to sell diesel fuel and diesel engines, for example, have worked hard to prevent market share losses to the upstart competitor.

The DC area CNG buses are very obvious - some are painted with jungle scenes to emphasize their green cred while others simply have the large-letter marketing slogan - “This Bus Running on Clean Natural Gas” - plastered on three of the four surfaces of the vehicle. CNG works especially well for a large fleet that gets refueled at certain fixed stations and includes enough vehicles to support a specialized group of mechanics and parts inventory. CNG buses cost a bit more than diesel buses, but they can run more cleanly. When the fuel is available for a 50% discount, the economics look pretty attractive.

As school districts struggle with the high cost of diesel fuel for their bus fleets, perhaps it is time for more of them to take another look at CNG if they are planning any large scale bus replacement purchases. The National Renewable Energy Laboratory (NREL) produced a comprehensive study of the choices titled Washington Metropolitan Area Transit Authority: Compressed Natural Gas Transit Bus Evaluation in April 2006. In order to use the study for a current decision, it is important to update the fuel price figures; the market has changed quite a bit since the evaluation period (2001-2002).

One more thread to tie in. One big frustration from my involvement in numerous energy related debates is that people with an anti-nuclear position often dismiss the value of increased use of nuclear power with regard to helping to meet the demand for motor fuels. Their line is that nuclear power is only useful for producing electricity - which is demonstrably not true - and that oil is used for transportation, not electricity production - which is also not true.

All that aside, there should be no argument that natural gas is most definitely used for electricity production (approximately 20% of the electricity in the US comes from burning natural gas), that the increased use of gas in electricity has caused part of the 600% increase in natural gas prices over the past 10 years, and that new nuclear power plants can displace some of that gas to make it more available for other uses. If there is more gas available, it would make CNG vehicles even more competitive against diesel fuel vehicles.

The law of supply and demand has never been repealed - if the demand for gas in electrical power plants goes down, the price of gas will go down until other customers enter the market to purchase that newly available supply.

Photo Credit WMATA Photo by Larry Levine
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