Peak Oil Investments I'm Putting My Money On: Part III, Natural Gas Vehicles

Mar. 24, 2010 5:14 AM ETWPRT, CLNE57 Comments
Tom Konrad, CFA profile picture
Tom Konrad, CFA

In Part II of this series, I listed five potential substitutes that have been proposed to replace oil as limited supply and growth in developing markets draw oil away from traditional users. These were:

  • Biofuels and Biochemicals
  • Vehicle Electrification
  • Hydrogen
  • Natural Gas
  • Coal and Natural Gas to Liquids

Part I looked deeper into the potential for biofuels to displace oil , and made some recommendations as to which stock might benefit most from this trend. Part II looked at vehicle electrification and hydrogen fuel cell vehicles. This part looks at natural gas vehicles [NGVs], their potential to displace oil, and associated potential investments.

Why the Pickens Plan Won't Work

To understand why we should not expect too much from NGVs, I find it useful to start with the reasons proponents expect that NGVs should be able to displace oil. T. Boone Pickens is the leading proponent of this strategy, so let's take the main points from his Pickens Plan:

  1. It's off-the shelf technology
  2. Initial costs will fall as manufacturing ramps up
  3. Fuel costs are lower than diesel
  4. We have abundant domestic natural gas supplies.
  5. Electric Vehicles and Hydrogen are not viable for long distance trucking
  6. NGVs are a natural fit for fleet vehicles.
  7. Natural Gas is the cleanest fossil fuel
  8. There is an existing natural gas infrastructure throughout the country.

I recently came across a series of well-argued articles by Eamon Keane, a British Energy Systems Engineering Master's student, on why NGVs won't decrease oil dependence. I'm going to let him do most of the arguing here, since he goes into much more detail than I would, and simply point readers to the articles where he takes on each of these points.

Off-the shelf technology

That means that we already know how to use natural gas for transport. This

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Tom Konrad, CFA profile picture
I have canceled my republication agreement with Seeking Alpha.  Look for my future articles at Tom Konrad, PhD., CFA is a portfolio manager, financial analyst, and freelance writer specializing in renewable energy and energy efficiency. He is currently looking for a money management firm to sponsor what he believes would be the first dividend income oriented green mutual fund, based on a strategy, the Green Global Equity Income Portfolio, he has been managing since December 2013. He is Editor at Tom lives in New York's lower Hudson River Valley. He volunteers for the environmental nonprofit community, runs, and is a woodworker. He's currently using those woodworking skills to renovate (and upgrade the energy performance) of the 1930 farmhouse he lives in with his wife. He can be reached at tom at tom konrad dot com.

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