MHI Solutions Improving Supply Chain Performance
Growth in Natural Gas Usage in the Transportation Sector Expected to Increase in Coming Years
By Sheryl S. Jackson
When crude oil prices began rising in 2006, natural gas was seen as a cost-effective fuel alternative for members of the supply chain. The subsequent drop in oil-based fuel prices slowed the purchase of transportation that relies on compressed natural gas, but the trend toward natural gas is expected to increase for a number of reasons.
“There are many companies that are still adopting compressed natural gas (CNG) vehicles even though the fuel cost savings is not as significant as it was several years ago,” says Steve Tam, vice president at ACT Research. Many industries like the environmentally conscious image that choosing a cleaner-burning fuel promotes, he adds. “For instance, the food industry is committed to green practices, so shipping customers are demanding environmentally conscious logistics partners,” he says.
According to Tam, 6,800 natural gas-powered heavy duty trucks and buses were sold in 2016, but sales predictions for 2017 show a drop to 6,000 vehicles. “The overall market is down for 2017 for all purchases in this category, but as fleets age and more vehicles are replaced, we expect to see replacements include natural gas vehicles.”
Transportation companies that routinely operate in large, urban areas that have been designated as nonattainment zones by the Environmental Protection Agency (EPA) are more likely to focus on transitioning their fleet to include CNG vehicles, says Tam. “For example, companies in Los Angeles and Chicago are adopting CNG at higher rates,” he explains. “Not only does this make it possible to comply with EPA guidelines for air pollutants, but it gives them a potential competitive edge as a green partner.”
Even without a big difference in the price of CNG and traditional fuels, fleet managers are looking at CNG as a viable, long-term alternative fuel, says Tam. “There is an additional cost for a CNG heavy duty truck—as much as $50,000 more than other trucks—but many people view the cost of operating CNG vehicles as predictable compared to the volatility of diesel fuel,” he says. “The ability to accurately predict and manage fuel costs over the long term is a benefit for fleet managers.”