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October 2012
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Vast Natural Gas Reserves
Not Necessarily a Panacea


Are North America’s abundant natural gas reserves the economic and environmental panacea many people believe? Conventional wisdom suggests that if we convert many of our nation’s cars and trucks to run on compressed natural gas, we can dramatically reduce our dependence on foreign oil.

“A seven-year program to get American trucking on natural gas would go a long way toward solving the balance of trade. It would cut the cost of transporting goods by 50 percent, cut our carbon footprint by 50 percent, and keep a whole lot of oil imports out of this country. It would create a lot of infrastructure jobs, as well,” said Bert Miller, president of Phoenix Closures, during a recent MSCI panel discussion.

While this common belief is theoretically true, the math is not as simple as it appears. Any major move by business or government to shift the market away from gasoline and diesel fuel would trigger a host of unpredictable actions by other interests. “There is a very long list of alternate fuels that compete with one another and none is going to sit idly by and let any of the others take over the fuel choice,” said automotive consultant Dennis DesRosiers. Compressed natural gas is just one in a list of alternatives to gas and diesel that also includes biodiesel, ethanol, propane, butanol, methanol, hydrogen, plug-in electric, hybrids, and any combination of the above. “We have seen great promises made from a number of these and all so far have failed. Why would anyone believe that CNG will be any different, especially given the infrastructure costs?”

There are untold trillions of cubic feet of natural gas in shale deposits all over North America. Building the infrastructure to retrieve and distribute it, in gas and liquid form, will take many years and many billions of dollars (and consume lots of steel). Investors’ appetite for that kind of risk rises and falls with the price of the gas, however, which is only $3 to $4 per MMBtu right now because supply is so far ahead of demand. At that price, who is going to step up and build a network of CNG fueling stations or gas liquefaction plants at the nation’s ports?

Natural gas is not the ultimate solution it may seem just because there’s so much of it. But as the free market separates the winners and the losers from among the competing green technologies, converting some types of vehicles to CNG may help buy us time to find the ultimate replacement for fossil transportation fuels.
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