RBC: NatGas Boom Could Mean Paradigm Shift

(Feb. 28, 2013) – The rate of penetration of natural gas commercial trucks into the market will depend on the price of shale gas production, according to a report by RBC Capital Markets.

If the cost of natural gas remains cheap due to the ongoing “boom” in U.S. shale gas production, more trucking companies may migrate away from diesel-powered vehicles, the report states. However, if natural gas exportation drives up costs, it may slow down any such changeover.

“This process is in its infancy but is gaining traction,” John Barnes, RBC’s transport and logistics analyst, told Fleet Owner magazine. “There are currently limitations including but not limited to: lack of natural gas distribution at truck stops, lack of a common natural gas technology, i.e. the use of compressed natural gas (CNG) versus liquefied natural gas (LNG); and carriers are looking for commonality of equipment and haven't yet been willing to operate a blended fleet of diesel fueled vehicles beside natural gas fueled vehicles.”

Natural Gas trucks can become more prevalent if refueling infrastructure is developed and the industry decides on a common standard for class 8 natural gas powered engines.

RBC said that 87 percent of North American 357 executives polled predict natural gas prices will stay the same or increase over the next two years, with 73% anticipating a price increase of 10 per cent or more in the next five years.

Marc Harris, RBC’s co-head of global research added that the shale gas boom is making U.S. companies think twice, with companies in the energy, manufacturing and transportation industries are reassessing underlying market drivers, business models and risks as a result of the shale gas boom. On an economy-wide level, respondents expect that shale gas will improve country competitiveness in both the U.S. (52%) and in Canada (48%).

“We are entering a paradigm shift in the way that businesses and national governments look at energy, particularly as it relates to underlying market drivers, business models, risks and economic impact stemming from the shale gas boom,” he explained. “The coming years will be transformative for companies, particularly those in the energy, infrastructure, manufacturing and transportation sectors, which will, in turn, create opportunities for both investors and corporations.”