U.S. Natural Gas Fund And CNG Fleet Vehicles: Not Just A Lot Of Hot Air

Includes: UNG
by: Jeff Binkley

What do Waste Management, Inc. (NYSE:WM), United Parcel Service, Inc. (NYSE:UPS), and AT&T (NYSE:T) have in common? They all are replacing much of their existing fleet with natural gas powered vehicles (NGVs).

In a sign of the rising popularity of natural gas vehicles, these three dissimilar industries with one overwhelming common denominator, the use of gas or diesel trucks in their daily operations, have been replacing their traditionally powered fleets with natural gas powered vehicles for years.

United Parcel Service began using natural gas vehicles (NGVs) in 1989 and now has more than 1,300 of the familiar brown trucks making deliveries powered by compressed natural gas (CNG) in a dozen markets around the country. They announced earlier this year the addition of another 48 NGV semi-tractors to their western freight fleet.

Waste Management's fleet of roughly 1,700 CNG and liquefied natural gas vehicles is the largest in the North American waste industry. Most interestingly, in August of this year, the company announced that in the first half of 2012 it had opened thirteen CNG stations across the country, 9 of which having CNG fueling accessible to the public. That brought their total of natural gas fueling stations to 31. The company anticipates having 17 more either in operation or under construction by the end of 2012. Waste Management states that natural gas vehicles will represent 80 percent of their annual new truck purchases in 2012 with that trend to continue for the next five years.

AT&T currently uses close to 3,000 NGVs in their fleet. These are typically Ford E-250 vans modified for CNG use. The company has recently ordered 101 CNG Chevrolet Express cargo vans direct from GM (NYSE:GM). Through 2013, Ma Bell anticipates purchasing up to 8,000 NGVs on its way to fulfill its commitment to have 15,000 alternative-fuel vehicles on the road serving customers.

With General Motors Corp., Ford Motor Co. (NYSE:F) and Chrysler Corp. all announcing this year that new pick-up trucks will have the option of a hybrid gasoline-CNG engine, the use of CNG should only grow in non-fleet usage as well.

On the environmental front, natural gas represents the "clean" fossil fuel in the minds of many in Washington, including many recently returned to power in the last election.

For several years now, the U.S. Natural Gas Fund (NYSEARCA:UNG) has represented a pretty lousy holding. But with the growing fleet usage, the rising availability of CNG access at many local fueling stations, and with the recent pullback to near its 50-week average, UNG may represent an opportunity to catch a rising long term star for your portfolio.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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