It has been done with trucks and certain states are in the process of changing their fleets of cars over to NG. Infrastructure is an issue along with some conversion problems, but in time I’d like to see the same thing.
Cost of Gasoline vs. Natural Gas 4 comments
Feb 28, 2011
I just wanted to share a quick back of the envelope calculation with the SeekingAlpha community. I did not realize the price difference was this great, but it turns out that gasoline is about 5 to 6 times as expensive as natural gas on a per unit energy basis.
In November, Boone Pickens told CNBC that gasoline was about 4 times as expensive as natural gas, but it appears that he either underestimated the true difference in price or the price has diverged even further since his testimony. Those of you in the energy industry can just ignore this blog post, as I imagine you monitor this price differential on a daily basis and I won’t be saying anything you don’t already know, but I would appreciate any commentary you might have to offer.
Here in California I paid $4.80 last month for each block of 1,000 cubic feet of nat gas that I consumed from my local utility company. 1,000 cubic feet of natural gas has about 1 million BTUs of energy although it can vary slightly depending on where the gas came from. From this logic I paid $4.80 for each 1 million BTUs of energy that I consumed from natural gas.
Refined gasoline has about 120,000 BTUs per gallon, but again it depends on where the oil came from, the precise refining process, and how much ethanol and other additives the gasoline contains. Thus, it takes about 8 gallons of gasoline to produce 1,000,000 BTUs of energy. According to Gasbuddy.com the average price today in the USA for a gallon of gasoline is $3.35. Thus, it costs about $27.92 to produce 1 million BTUs of energy from refined gasoline.
Thus, gasoline is almost 6 times as expensive as natural gas on a per unit energy basis.
Ethanol is even more expensive than gasoline. Wholesale ethanol is currently trading at $2.59 per gallon. Ethanol has about 80,000 BTUs per gallon, which means it presently costs about $32.38 to produce 1 million BTUs from ethanol. This is the wholesale trading price and does not consider any mark up or taxes passed on to consumers at the pump.
I thought some of you who don’t pay attention to this type of thing might find this interesting. I think it shows that we really need to begin switching to natural gas automobiles soon. Ethanol is a complete waste of time in my opinion because it causes the price of corn and sugar to rise since it is made from those agricultural commodities.
At the end of 2007 coal had risen to a price of $36.07 per ton or $1.82 per million btu. So natural gas is 2.64 times more expensive than coal.
Now a coal car, is a real pain in the butt, because you need a coal tender, and it is hot and dirty and there are not many coal stations along the highways, so travel by coal car may not be practical.
Great post.
Question: has anyone else noticed that for the last month or so, pump prices have gone down while the price of crude has gone up? Crude went from the high 80’s to the high 90’s per barrel, while the price at the pump has been coming down. We’re buying regular here for $3.19 per gallon, and the price of crude now would justify at least 50 to 70 cents more, based on recent history.
Could the lowered price of NG be putting downward pressure on gasoline? Or perhaps this has something to do with refining?