Pickens' Natural Gas Nonsense

"Get this one," says billionaire T. Boone Pickens in his latest TV ad, "Iran is changing its cars to natural gas and we're not doing a thing here. They're doing this to use less oil and sell it for $120 a barrel. We can switch our cars to natural gas and stop sending our dollars to foreign countries."

Readers of this column know better than to take at face value the marketing of the so-called "Pickens Plan."

So what's the full story behind Iran's move, and what would be the impact of switching our cars to natural gas?

Although Iran is a major oil and gas producer, it lacks oil-refining capacity and must import about 50 percent of its gasoline. To be less vulnerable to international pressure concerning its nuclear program, President Mahmoud Ahmadinejad decided to reduce Iran's reliance on imported gasoline.

He started with rationing in May 2007. But that quickly led to violent social unrest.

Ahmadinejad then decided to convert Iran's new car fleet to natural gas. So 60 percent of Iran's car production this year -- about 429,000 vehicles -- will be dual-fuel-ready, capable of running on both gasoline and natural gas.

But contrary to Pickens assertion, Iran isn't trying to use less oil:; It's trying to use less imported gasoline -- and only to thwart a possible international gasoline embargo.

Though hardly a role model for energy policy, should we nevertheless follow Iran's lead with respect to natural-gas cars? Just what would that mean to you and to our economy?

While the natural gas sold for auto fuel is as much as 50 percent less expensive than gasoline -- at least for now -- the cover charge to get into a natural-gas vehicle can easily erase any savings.

A new natural-gas-powered car, such as the Honda Civic GX, for example, is almost 40 percent more expensive than a conventional Civic ($24,590 versus $17,700).

While tax credits can reduce the cost by thousands, somebody -- either you and/or taxpayers -- will be paying the difference.

If natural gas fuel saved you, say, $2 per gallon, then you'd have to drive 124,020 highway miles or 82,680 city miles to break even on fuel costs against the $6,890 purchase price premium.

You can convert an existing car from gasoline to natural gas, but the costs are daunting.

Converting a car to dual-use (as in Iran) costs between $6,000 to $10,000. Converting a car to run on natural gas only is about half as expensive.

Even so, the conversion has to be done correctly or, in the worst case, you risk leaks that could turn your car into an improvised explosive device. And if your car is altered without proof of EPA certification, you might not get any of the all-important conversion tax credits.

Then there's the inconvenience. Though their fuel tanks are larger -- which, incidentally, reduces trunk space -- natural gas cars have less range.

While a new Honda Civic can go as far as 500 miles on a tank of gasoline, the GX's range is less than half of that -- and, currently, there are only about 1,600 natural-gas refueling stations across the country, compared with 200,000 gasoline stations.

If your home uses natural gas, you could buy a home filling station at a cost of about $2,000 plus installation. While home filling stations can further reduce fuel costs to substantially below $2 per gallon, the devices take about 4 hours to replenish the fuel consumed by only 50 miles of driving. So much for gas-and-go.

Moving past the personal expense and inconvenience, the broader implications of natural-gas cars are worrisome.

The U.S. currently uses about 23 trillion cubic feet of natural gas per year. Like all commodities, the price of natural gas is supply-and-demand dependent.

Switching just 10 percent of the U.S. car fleet to natural gas would dramatically increase our consumption of natural gas by about 8 percent (1.9 trillion cubic feet) -- an amount that is slightly less than one-half of all current residential natural gas usage and one-quarter of all industrial usage.

The price ramifications of such a demand spike would likely be significant. The current cost advantage of natural gas over gasoline could easily be reversed. Our move toward energy independence could also be compromised.

Domestic production of natural gas has not kept pace with rapidly increasing demand. Consequently, about 15 percent of our natural gas must now be imported.

Without more domestic gas drilling, additional demand will need to be met with natural gas imported by pipeline and in liquefied form from the very same foreign sources that T. Boone Pickens rails about in the context of oil.

In its most recent annual outlook, the U.S. Department of Energy projects that the U.S. natural-gas market will become more integrated with natural-gas markets worldwide as the U.S. becomes more dependent on imported liquefied natural gas -- causing greater uncertainty in future U.S. natural-gas prices.

The natural-gas supply problem will be additionally magnified if significant greenhouse-gas regulation is enacted.

Here's how: Currently, when natural gas gets too expensive, electric utilities often substitute coal or cheaper fuels for power generation.

Under a greenhouse-gas regulation scheme, however, inexpensive coal might no longer be an alternative because of the significantly greater greenhouse-gas emissions involved with its combustion.

Utilities, and ultimately consumers, could easily find themselves at the mercy of natural-gas barons -- like T. Boone Pickens himself, a large investor in natural gas.

Check out the following post on CNGchat.com. Its one of the sources I’ve been using while looking at buying a CNG bi-fuel truck. The tanks I’ve seen used are aluminum wrapped in carbon fiber. These are high pressure and are expensive tanks. The following is a comment on the testing tanks experience.

http://cngchat.com/forum/showthread.php?t=845

The pressures I referenced were for pump fill pressures. Depending on the repair and upkeep of the pump the filling pressure may be lower than the 3000 psi + needed for a good “full” fill.

I didn’t say it wouldn’t work, but only in places where CNG is available,...where I live there are very few natural gas lines that you could hook up to. We use electric in 90% of the homes. The southeast does not have that as readily available as other areas of the country. And if you have a pump and no stations are availabe to refill, then you can’t get very far from home. It’s great for those who have availability.....but not for areas that don’t have a lot of natural gas...

The cost of implementing CNG availability to interstate uses will be astronomical. If we don’t drill to provide low cost gas for the poor, then we have not done the right thing...how many single mothers, elderly and disabled can afford to spend 3-7000 dollars to revamp a cheap car that they are having trouble paying for in the first place. We need to do it all, and those who can afford it, it’s great. But those who can’t should be allowed to use gas until their car is in the junkyard.

Thanks, I appeciate your post. I agree, “dual-fuel” complicates the picture quite a lot, because you’d have to have two radically different fuel delivery systems. To my knowledge, it’s not exceptionally difficult (nor costly) to convert a 100% gas to 100% CNG, but the ability to switch back and forth, I would imagine, could be fairly complex. I’d imagine it’s not made any simpler at all that most cars now utilize fuel injection vs carbueration. Would you agree?

“If we don’t drill to provide low cost gas for the poor, then we have not done the right thing...how many single mothers, elderly and disabled can afford to spend 3-7000 dollars to revamp a cheap car that they are having trouble paying for in the first place.”

You are assuming that demand (markets) will not over time, bring about a reduction in the conversion costs, rendering it possible, as the technology and the cost of it improves (which is always the case if demand rises enough) for, eventually, even if not immediately, many more people could be able to afford the conversion costs. I am assuming the opposite; that if sufficient demand is created the costs will gradually go down.

And, contrary to your assumption about my position it is NOT one of doing nothing about oil sources in the meantime. I just don’t think that is ALL we could, or should do, for the long term. And, for the long term, markets and technology MAY bring LNG and oil “closer” in “long term” costs for a car owner, and maybe, in time, close enough to be an either-or proposition for lots of people. If the LNG option, or others are discouraged, “drill now” alone will leave the tank empty eventually.

I have NEVER been a drill only person. If you look up my past posts on this subject you should find I am a do EVERYTHING person. How you got that from my post is unbelievable. I was only speaking to the fact that not all areas of the USA have access to a lot of Natural Gas. As for the price to revamp coming down, it doesn’t matter if the availability of the natural gas is not there.

If you can get natural gas..then do it. I don’t have that access, since my home is electric like 90% of homes in my ares. That was the major point of my answer. Drilling is necessary for a certain amount of people, but for the others ALL ALTERNATIVES should be done. Any “alternative” must be mass produced, and massive amounts of places to refuel are necessary to travel from one area to another, to make it viable and reasonable in cost to the normal person...so we need gas in the meantime. Being a hothead about this accomplishes nothing!

Sorry for any misunderstanding of priorities.

“I was only speaking to the fact that not all areas of the USA have access to a lot of Natural Gas.”

The answer there is (a)more imports and (b)more pipelines (for imported and domestic supplies) and (c)less government regulatory interference to both (a) and (b).

In some areas both (a) and (b) are opposed by local politicians of both parties, due to local special interests that don’t want competition from natural gas. For instance, New Jersey has easy and plentiful natural gas and yet just a couple miles across the river in metro New York it is often not available or very expensive in many places. “Supply” is obviously NOT the issue in that case, and demonstrates the role of politics, government and regulation that often inhibits larger availability of natural gas.

World wide, and even domestically over time, there IS no actual shortage of natural gas for the whole country; only a shortage of the political will to permit the supplies to get out there.

One of the “political will” failures is the political treatment of energy suppliers as “just another company seeking too much profit”, when, the fact is that cheaper and more plentiful energy is not just good for homes, schools and hospitals (who politicians will readily subsidize - doesn’t make it cheaper, just shifts the cost), it is what EVERY business needs as well. Helping energy to be produced and delivered at less cost is good for the entire economy. Helping energy companies be more efficient and profitable at it (keeping the direct and indirect costs of government on them down) helps EVERYONE by helping them get more supplies to all.

Yes, I agree completely.

The dual fuel approach is complex and costly.

There are (or were) several companies that specialized in doing conversions of small block V8’s to run on CNG. These engines really ran quite well, and are found running on “stove” quality CNG in all sorts of applications that were exempt from emissions standards.

Pickens starts off his commercials with "Drill Drill Drill"

Or starts them saying we can't drill our way out of this, or that we don't have the domestic oil to drill, and makes that all too idiotic claim to support a "renewable energy" plan.

I would like T. Boone Pickens, or any body else, to explain to me how we are going to defy the laws of physics which state that energy cannot be recycled or renewed.

The real answer is converting the coal we can’t mine to clean natural gas, check out the economics for the under ground hydrogasification. Mind everyone that henry hub prices have been as high as $15 mmbtu in july. at a production cost of <$3 mmbtu the profit margin for selling it wholesale at $6+ mmbtu is obscene its only a matter of time before some company starts using this kind of technology. the plus side is to appease the carbon gods the spent gasification chamber can be used to store the CO2 produced making the SNG. since the process produced pure high pressure CO2 the storage costs are reduced.

http://www.hceco.com/HCEI105001.pdf

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