Friday, March 8, 2013

Petroleum Sellers Would Have to Drastically Lower Their Prices to Compete

Natural gas is hugely abundant in the United States, and as such, it is inexpensive. It could be easily converted to methanol and used as a liquid fuel, which could sell without subsidies for considerably less per mile than gasoline, creating real fuel competition and using market forces to lower fuel prices. The following are excerpts from a recent story in the Wall Street Journal about a railroad company taking advantage of the natural gas glut:

BNSF Railway Co., one of the country's biggest consumers of diesel fuel, plans this year to test using natural gas to power its locomotives instead. BNSF, the largest railroad in the U.S., estimates it is the second-biggest user of diesel in the country, after the U.S. Navy.

BNSF Chief Executive Matt Rose said his company would quickly move to a "retrofit of existing road locomotives" if the pilot locomotives prove reliable. The pilot trains are expected to get rolling this fall in the hopes retrofitting could begin about a year later.

A gallon of diesel fuel cost an average of $3.97 last year, according to federal statistics. The equivalent amount of energy in natural gas cost 48 cents at industrial prices. That gap doesn't accurately reflect the potential savings since the railroad will have to pay to cool natural gas into a dense, energy-packed liquid. Still, experts believe that natural gas has the potential to be significantly less expensive than diesel for years to come.

Preliminary tests indicated that LNG-powered trains could go farther before refueling than diesel trains and have comparable towing power.

The BNSF move is the latest step by companies and industries to use more natural gas, a fuel that is efficient, domestically produced and cleaner than alternatives. The growing supply of natural gas in North America has made it significantly less expensive than crude oil for each unit of energy delivered.

Electric utilities, which years ago essentially abandoned burning oil in favor of coal, have started shifting to natural gas-fired power plants. Chemical, steel and fertilizer makers are planning new facilities in the U.S. to take advantage of low natural gas prices.

Like municipal bus fleets, which have converted to engines running on compressed natural gas in Los Angeles and other U.S. cities, trains are easier to fuel than other modes of transportation because they repeatedly travel on fixed routes. That makes it less cumbersome to build enough fueling depots.

Read the whole article here: Berkshire's BNSF Railway to Test Switch to Natural Gas.

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