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Thanks to a barrage of media attention everyone has heard of electric cars, but vehicles that run on natural are still relatively unknown. In our last piece, "Exporting Natural Gas Would be Very Profitable for E&P Companies" we talked about how there is an oversupply of natural gas in North America, recently causing prices to drop to a ten year low. One way to deal with excess supply is to transport the gas to other regions with less supply such as Europe and Asia. As a follow up we are writing about an alternative to deal with the surplus of domestic natural gas by using it to fuel cars.

One way to develop natural gas is to convert it into compressed natural gas, or CNG. CNG should not be confused with liquefied natural gas, or LNG. CNG is natural gas compressed to 1% of its natural volume at standard atmospheric pressure and stored in a gaseous state, while LNG is natural gas that has been cooled and liquefied. CNG is cheaper to produce and store than LNG because it doesn't have to be cooled during processing.

CNG can be used as an alternative to gasoline and is much cheaper, safer and cleaner to use as a fuel. It produces less carbon emissions and less greenhouse gas than regular gasoline or diesel and is more economical to produce. Since 98% of natural gas used in the U.S. is produced within North America, CNG also provides the opportunity to reduce our reliance on foreign oil.

CNG can be used in traditional gasoline vehicles that are converted into bi-fuel cars. Bi-fuel cars are being used more and more in areas of Asia, Europe and Latin America where typical gasoline prices are much higher than the U.S. It is estimated that use of CNG worldwide has grown at a 30% rate year over year. Transportation is the only world energy market that relies heavily on just one type of fuel, and CNG is a good alternative in terms of cost and environmental concern.

One company stepping up to develop and utilize CNG domestically is Chesapeake (CHK). By doing so they hope to spark more demand for natural gas here in the U.S. They have invested $160 million in Clean Energy Fuels (CLNE), run by T. Boone Pickens, to add natural gas pumps to 300 truck stops. Approximately 1,000 more are needed to develop a nationwide network. CHK plans on rolling out a proprietary DNG (Diesel Natural Gas) technology later this year whereby any diesel engine can be changed to run on a mix of natural gas and diesel fuel.

They also are working with appliance manufacturers to develop appliances that use CNG for refueling, thereby lowering costs. CHK is also working with many different companies and manufactures to develop more uses for CNG. Chesapeake believes that natural gas vehicles are the answer to rising gasoline prices. Natural gas is at an all time low in the U.S. and whether it is exported as LNG or used domestically as CNG it is a good time for companies to start seeking alternative uses.

Some car companies are also working to combat high gasoline prices by developing natural gas vehicles, or NGVs. One such company is Honda Motor Company (HMC). Honda's NGV is called the Civic GX and runs on CNG. It was first introduced in 1998 and was only available in 4 states, but is now available in 35 states.

The Civic GX was rated first by the American Council for an Energy-Efficient Economy as the "greenest vehicle of the year" for eight years in a row. NGVs can be refueled anywhere in the U.S. where there are existing natural gas lines. The network of CNG stations is growing, and current lists can be found on the U.S. Department of Energy website or on

A key to making NGV an alternative for consumers is strong government incentives. Almost 250 bills have been introduced in State Houses since January 2011 that would provide incentives for alternative fuel vehicles. Most of these measures include cars and trucks fueled by natural gas.

The White House and U.S. automakers have agreed on a proposal to require a fleet average of 54 miles per gallon to cut down on greenhouse gas emissions and oil consumption. It is only a matter of time before we see an increased use of CNG to achieve these goals. It is a safer, cleaner and more economical solution.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Compressed Natural Gas: The Solution To High Prices At The Pump