Cheap diesel deals big setback to natural gas truck sales

Thu Nov 5, 2015 12:01am EST
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By Nichola Groom

Nov 5 (Reuters) - Sales of trucks powered by natural gas are sputtering and growth will be far weaker this year than last as tumbling diesel prices prevent drivers from switching over to the cleaner-burning fuel even though it is cheaper than it has been in years.

Sales of medium and heavy duty natural gas trucks are expected to rise less than 1 percent this year after climbing nearly 27 percent in 2014, Power Systems Research, a St. Paul, Minnesota firm that studies engines, told Reuters. It cut that projection from about 4 percent earlier this year.

Lured by lower fuel prices and the desire to please increasingly emissions-conscious customers, the trucking industry in recent years has been adopting natural gas as a fuel source despite far higher costs for the trucks.

But now oil's more than 50 percent drop in the last 16 months is setting back the natural gas truck market by several years.

"Adoption rates of natural gas engines will ultimately depend on the price of diesel fuel," said Jim Downey, a vice president at Power Systems Research, which now thinks it will take until at least 2020 for 4 or 5 percent of U.S. trucks to run on natural gas, not 2016 or 2017 as previously projected.

A few thousand natural gas vehicles are sold each year for long haul trucking in the United States, compared with some 3.4 million class 8 trucks - the heaviest duty truck classification - on the roads.

Though benchmark U.S. natural gas has tumbled by more than 20 percent since late September to around $2 per million Btu on some days, the cost savings of using natural gas versus diesel is narrower than it was a year ago.

That benefit has dwindled to about 15 cents a gallon, down from 50 cents a gallon a year ago, said Raymond James analyst Pavel Molchanov.   Continued...