Lately, I’ve seen a lot of headlines that highlight companies that are adding or replacing vehicles in their fleets with natural gas units. Various suppliers are also investing millions of dollars to expand their distribution networks so that CNG and LNG can be obtained more conveniently.
The momentum to switch from diesel fuel to natural gas is steadily increasing as more and more companies anticipate benefits that outweigh limitations. However, the switch is not advantageous for every company and a careful analysis is required to understand the financial and operational pros and cons to your business.
There are clearly some advantages to natural gas, especially if your company places a high priority on political and environmental issues. An abundant supply of natural gas can now be produced domestically in the US compared to a significant dependency on crude oil imported from foreign countries. Natural gas also burns cleaner than diesel fuel, although that gap may narrow as diesel engine emission standards continue to ratchet up.
Natural gas is a clear winner when comparing to diesel fuel prices. Currently, it can be less than half the cost of diesel with the help of some tax advantages. Natural gas prices have shown more stability too since they are not impacted as greatly by external political factors or OPEC. But, it’s important to consider that certain tax credits periodically expire and may not be renewed for the long-term, especially as the government struggles to fund backlogged infrastructure projects. In addition, supplies of natural gas may tighten if exporting plans move forward which could push prices higher.
Besides the price of fuel, there are other costs related to natural gas that must be considered. For starters, the cost to purchase a vehicle with an engine powered by natural gas is significantly more than a diesel engine. As production of natural gas engines continues to scale, the price difference will diminish, but that may take several more years. In the meantime, it’s very important to factor in how the additional up-front cost will be amortized over the life of the vehicle.
Another cost disadvantage of natural gas relates to the fuel efficiency compared to diesel fuel; you won’t get as many miles out of each gallon equivalent, particularly with CNG. So you may pay less per gallon, but the savings aren’t as big when you calculate what you’re actually paying to travel each mile.
You’ll get more miles out of LNG compared to CNG, but you should still consider the impact on your drivers’ time. Will they have to fuel their vehicles more frequently? How many miles and how much time will be needed to drive out of route to find a fueling station? Considering Hours of Service rules along with pay rates, you probably don’t want your drivers wasting more time loading fuel.
There are a number of factors to consider when evaluating the pros and cons of moving to natural gas from diesel fuel, but the differences are evolving rapidly. If you are considering a switch and need assistance to perform a thorough evaluation, the experts at Sokolis Group Fuel Management are ready to help you.