Fleets Under Pressure
Is now the time to lock-in on the bi-fuel bandwagon and switch those gas/diesel pickups to CNG? The true cost will make that an easy choice …
By Robin Walton, CPA
When our ProPickup editors came back from Indianapolis they were talking about the Compressed Natural Gas (CNG) vehicles they had seen at the National Truck Equipment Association Show (NTEA). They had plenty to say about gaseous engine prep, octane ratings and CNG filling stations.
But I wanted to know about the costs involved with purchasing, operating and maintaining these vehicles.
CNG technology takes advantage of the same natural gas resources that many of our homes and businesses use for heating and power. The gas must be compressed to a pressure of 2,900 to 3,600 psi for vehicle use so the volume carried on board gives the vehicles practical range. The compressed version of the natural gas is readily available in some regions and practically non-existent in other areas.
Units of CNG can be referred to as gasoline gallon equivalent (GGE), which approximates the amount of CNG it takes to produce the same BTUs as a gallon of regular gasoline.
One of the incentives for using CNG is that the price per GGE is on average $1.25 less than the price of a gallon of gasoline. In oil and gas producing areas, the price difference can be much greater.
If CNG is less expensive than gasoline, why isn’t it used more than gasoline?
The answers to this question will help you make the decision about CNG for your company.
I’ve already mentioned fuel availability. Obviously CNG powered vehicles are more practical in areas where you can actually get the fuel. If CNG grows in popularity, the market will likely make sure that the fuel is available in more areas.
The biggest factor slowing the use of CNG is the cost of CNG-capable vehicles. Ford, GM and Ram all make dual-fuel pickups capable of operating on CNG or gasoline.
But the option comes with a hefty price tag ranging from $10,000 to $15,000. There are several facets to consider when looking at the costs associated with CNG capable vehicles.
Theoretically, the difference in fuel cost will compensate for the additional vehicle expense over time, which will happen more quickly in some markets than others.
The U.S. Department of Energy’s Clean Cities Alternative Fuel Price Report (January 2012) shows the nationwide average gasoline price at $3.37 per gallon versus the price of CNG at $2.13 per GGE.
This translates into about $.06 per mile in fuel savings for a pickup that gets 20mpg. If such a pickup travels 25,000 miles a year, it would take 10 years to cover the upgrade cost of $15,000.
Keep in mind that market changes are hard to predict.
Diesel was cheaper than gas for many years prior to 2001 when our company switched to diesel pickups. Guess what happened to diesel prices that year? Diesel has been more expensive ever since.
Any time you make a business purchase you give up the opportunity to make an alternative purchase with that money.
Consider if the additional cost of going with CNG on a pickup could be better used on an additional piece of equipment needed to fulfill your contracts.
With the capital tied up waiting for reduced fuel cost to make up for the CNG upgrade, you could be accomplishing other goals.
Having to finance equipment replacement because the money is tied up could eat up the fuel savings costs in financing an alternative purchase. Consider the opportunity costs.
Current CNG technology by the Big Three places high pressure tanks in the cargo area of the pickup. These tanks take up a considerable amount of cargo space.
Will the lost capacity mean another vehicle must go to the same jobsite? Will it necessitate purchasing otherwise unneeded cargo management systems to make up for the lost space?
In addition to the lost volume in the cargo bed, the added weight of the system also reduces the available weight carrying and tow capacity of the vehicle.
Additional weight also affects fuel economy, tire wear and stresses on other vehicle components including the drive train and suspension.
These differences may be negligible, but could add up if multiplied through a fleet.
There is a possibility that oil change intervals may prove (through testing) to be extended on vehicles using CNG.
Your company’s goals may include improving social responsibility by using sustainable resources, reducing greenhouse gases and helping to reduce our country’s dependence upon foreign oil.
As commendable as these things are, they almost always come with a price tag. If your company wants to achieve some of these goals through CNG use, the fleet decision makers simply need to keep the true costs in mind.
While government entities can often make such mandates with little concern for cost, I suspect your company is looking for a balance.