CNG Price Fixing

Updated Jun 15, 2014

Hwt Senior Editor Bruce Smith Fueling 2015 Chevy Silverado With Cng

A little secret on how to cut your fuel costs by half-or more

Hearing the words “price fixing” evokes negative connotations, where in the reality of the construction world, business owners who don’t take advantage of fixing prices are leaving a lot of profit on the table.

Of course I’m talking about the price of fuel and not some underhanded deal made in a dark, smoke-filled back room.

Fuel prices fluctuate dramatically and that price volatility is a source of concern to CFOs and shareholders in companies that have large fleets of vehicles.

One way to eliminate that variable line item is to fix the price of fuel.

That’s where fleets running vehicles on compressed natural gas (CNG) have a huge advantage here in the States – and most company CFO don’t even know it.

CNG’s price per gasoline-gallon-equivalent (GGE) is relatively flat compared to gas and diesel – and industry experts say it will probably remain so for the next 5 to 10 years because of the abundance of the alternative fuel here under our own soil.

Fixing the price of what you pay for CNG requires striking a long-term fixed-price contract, usually 4-5 years, with a local CNG provider. That’s where the fuel savings pay off.

Today’s CNG price at public filling stations runs about $2.25 GGE. Companies with fleet contracts could shave $0.50-$0.75 GGE off that price, depending, of course, on the annual volume of fuel purchased.

“On top of that, if the alternative fuel tax incentives are re-instated again this year, businesses can take another $0.50/GGE for the rebate,” said John Coleman, Fleet Sustainability & Technology manager for Ford Motor Company. “That could bring the cost of CNG down to as low as $1.00 GGE for the biggest fleets in some locations.”

Even without the government tax incentive, the ROI for the cost of the typical pickup CNG conversion ($9,500-$12,000) would be quick. (Use CNG calculator.)

Coleman and others say the ROI on a typical mono-fuel CNG pickup would come at about 70,000 miles with a fixed CNG price contract that saves $1.50 off today’s gas and diesel prices. If conventional fuel prices rise over the next 5-10 years, then the ROI would be even sooner.

Another point of interest of such an agreement: If the contract has CNG vehicles refueling at the provider’s refueling site, then  there’s no added infrastructure cost to your company.

This is where CNG price fixing is a win-win deal for all parties involved. It’s something to think about when you’re looking at vehicle change-overs.