Natural gas offers savings for trucks
Using natural gas as an alternative fuel to diesel for heavy-duty trucks could result in savings of $158,000 per vehicle over 10 years, according to Conference Board of Canada’s base-case projections.
“However, nearly half of these savings are in the form of fuel-tax savings, as natural gas is currently exempt from the equivalent of a road diesel excise tax,” noted authors Vijay Gill and Len Coad in a report on the viability of replacing diesel with natural gas in segments of the transportation industry.
At most, taxes could shave off half the savings, but the board is gravitating toward the natural gas switch, especially because of the widening gulf between crude and natural gas prices. Oil now costs more than four times the price of natural gas per unit of energy with wholesale diesel and natural gas prices mirroring that differential.
A more “optimistic” scenario from the conference board suggests savings of $314,000, while a “pessimistic” scenario, which assumes persistently high gas prices, translates into paltry savings of $866 per truck over a decade.
Plus, the switch to cheap natural gas, primarily liquefied natural gas, could free up the more expensive barrels of crude for exports. “We didn’t tackle that directly, but diesel fuel is a third of our transportation energy consumption, which is oil-based,” Gill said. “If you shift 10 per cent of the fleet from diesel to natural gas, you effectively free up three per cent of crude oil to be used somewhere else. You would start to get an impact relatively early.”
The trucking industry is a good candidate for the natural gas switch as it accounts for 32 per cent of all energy use in the country’s transportation sector and fuel accounts for a larger portion of costs, compared to rail and airline industries.
While some analysts consider Canada’s natural gas price advantage temporary given the massive plans to export LNG to Asia, conference board analysts point to rising shale gas production in North America that “will likely serve as a price buffer against new sources of demand for natural gas.” But there are also significant obstacles.
“Uncertainty with respect to fuel taxes may impede more rapid adoption of natural gas in the transportation sector,” the conference board noted. “While it is currently not subject to an excise tax as a transport fuel, this could change as its popularity as a fuel grows.”