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MktNeutral.com (http://mktneutral.com) seeks to promote market neutral arbitrage trading strategies by offering data services, analytical tools, educational resources, and social networking to traders and investors who would like to better manage their risk through market neutral trading.
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  • Cost of Gasoline vs. Natural Gas 13 comments
    Feb 28, 2011 6:37 PM | about stocks: USO, UGA, UNG
    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.

    Stocks: USO, UGA, UNG
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Comments (13)
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  • Mark Averett
    , contributor
    Comment (1) | Send Message
     
    Very interesting, and not easy comparable information to find.
    15 May 2011, 07:31 AM Reply Like
  • DianaLMC
    , contributor
    Comments (2) | Send Message
     
    While price can be a factor transportation and storage of Natural gas is a factor that you failed to qualify into your article. Gasoline (or crude oil) can be extracted and transported from anywhere it is found to anywhere else in the world. Natural gas is most effectively extracted and transported via pipelines. As there is currently no worldwide system in place to allow for the export of natural gas around the world, the cost to transport this commodity far outweights the saving you speak of.
    6 Sep 2011, 03:25 PM Reply Like
  • dickerydo
    , contributor
    Comments (2) | Send Message
     
    I disagree with your statement that the author had not considered transportation and storage in the natural gas price. He clearly stated that he had been charged $4.80/million btus by his local utility. I'd bet that the gas was transported to his house via pipeline and the utility passed on their transportation costs to their customer.....
    As we switch our energy emphasis from oil to natural gas, I'm sure that prices will go up from increased taxes and supply and demand effects. What will surely go DOWN is our dependence on forgeign oil...a very good thing in my opinion.
    29 Mar 2012, 01:45 PM Reply Like
  • rickh
    , contributor
    Comments (166) | Send Message
     
    This completely ignores the efficiency of the fuel. Combustion engines utilize less than 33% of the potential energy in gasoline. They use over 90% of the potential energy in alcohol. That is why gasoline mixed with alcohol burns cleaner.
    19 Oct 2011, 01:09 PM Reply Like
  • lawsonpix
    , contributor
    Comment (1) | Send Message
     
    I'd like to see where you got this information from. Otherwise, it's just your word.
    2 Nov 2012, 03:22 PM Reply Like
  • rickh
    , contributor
    Comments (166) | Send Message
     
    Gasoline (petrol) EnginesModern gasoline engines have a maximum thermal efficiency of about 25% to 30% when used to power a car. In other words, even when the engine is operating at its point of maximum thermal efficiency, of the total heat energy released by the gasoline consumed, about 70-75% is rejected as heat without being turned into useful work, i.e. turning the crankshaft. Approximately half of this rejected heat is carried away by the exhaust gases, and half passes through the cylinder walls or cylinder head into the engine cooling system, and is passed to the atmosphere via the cooling system radiator.[1] Some of the work generated is also lost as friction, noise, air turbulence, and work used to turn engine equipment and appliances such as water and oil pumps and the electrical generator, and only about 25-30% of the energy released by the fuel consumed is available to move the vehicle.
    This came from "^ a b c d Hunter, Louis C. (1985). A History of Industrial Power in the United States, 1730-1930, Vol. 2: Steam Power. Charolttesville: University Press of Virginia.

     

    Alcohol burns at a lower temperature than does gasoline.
    13 Dec 2012, 04:57 PM Reply Like
  • mamthor
    , contributor
    Comment (1) | Send Message
     
    It is certainly true what you say here that the combustion of gasoline as a way of moving a car is inefficient, on the order of 30% efficiency. But what you need even more to justify is your claim that burning Alcohol is 90% efficient. I happen to know that you will not be able to justify this claim, since I know full well as a professor of physics that 90% efficiency for such an engine is thermodynamically impossible. It is also worth noting that efficiency of a thermodynamic engine tends to increase as you increase the temperature in the engine relative to the surrounding air, thus your assertion that alcohol burns at a lower temperature would tend to make alcohol less efficient than gasoline as a fuel, not more efficient.
    10 May 2013, 10:13 PM Reply Like
  • rickh
    , contributor
    Comments (166) | Send Message
     
    Then why does burning alcohol produce less pollution than burning gasoline? Also, increasing the temperature of the engine would help burn a higher percentage of the fuel, but good luck with that. Engineers have been accomplish that for a long time.
    30 May 2013, 01:23 PM Reply Like
  • Cardassian
    , contributor
    Comment (1) | Send Message
     
    In Toronto Canada, gasoline at the pump is about 10 times as expensive as natural gas piped into my house. The units are designed to confuse us as much as possible but I get $34.6/MMBTU for gasoline and $3.4/MMBTU for natural gas. Here are the source values: gasoline $1.20 per litre, natural gas $0.122 cents per cubic metre.
    21 Nov 2011, 01:17 PM Reply Like
  • Immortal Flatulance
    , contributor
    Comment (1) | Send Message
     
    I'm going out on a limb here, but the cost of gasoline at the pump includes significant taxes. Should NG come to the pump en mass, I'm sure taxes would be added (state & local gov won't allow any drop in their "revenue"). Another point, NG is very cheap right now at apx $3.50/MMbtu on 1 DEC 2011. Back in 2005-2006, NP peaked at $14. My point in bringing up both taxes and price fluctuation is that with a rise in NG demand and use, there will be a rise in price and taxes, so the savings quickly begins to get offset.
    1 Dec 2011, 12:00 PM Reply Like
  • jbsllvn
    , contributor
    Comment (1) | Send Message
     
    fill up at your residence with a Nat. gas compressor and avoid the taxes, if the gov't was really interested in its speak it would remove any potential taxes from nat. gas as a motor fuel
    16 Dec 2011, 01:31 PM Reply Like
  • rickh
    , contributor
    Comments (166) | Send Message
     
    Then how would we pay for road construction and repair?
    13 Jun 2012, 12:10 PM Reply Like
  • Myboyblu
    , contributor
    Comment (1) | Send Message
     
    Natural Gas $0.80 a gallon What else is there to discuss?
    I plan on buying a natural gas vehicle there's a natural gas filling station being put in 2 miles from my house. Hello new Yukon......
    Conway, Arkansas
    10 Jun 2012, 03:44 AM Reply Like
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