By James Cooke
In his keynote address at the Council of Supply Chain Management Professionals (CSCMP) conference earlier this month, legendary energy investor T. Boone Pickens made an argument for supply chains to switch from diesel fuel to natural gas for powering truck fleets. As rising diesel fuel prices continue to push up freight transportation costs, Pickens’ argument is certainly one that electrical distributors should consider. Although the use of natural gas in freight transportation comes with challenges right now, it offers long-term potential to tame transportation costs.
As a truck fuel, natural gas comes in two forms: liquefied natural gas (LNG) and compressed natural gas (CNG). As the name implies LNG is the liquid form of natural gas, which is primarily methane. It’s related to compressed natural gas (CNG), which, as the name suggests, is condensed under high pressure. Although trucks can run their engines using both LNG and CNG as a fuel source, it does not make sense to use CNG for long-haul trucking as there’s a weight penalty. The compressed gas adds extra weight that must be carried along with the freight load.
Natural gas typically costs far less than diesel fuel largely due to the fact that the United States has huge reserves of natural gas within its borders. In fact, at the moment, LNG averages around $2.80 per gallon while diesel costs exceed $4.00 per gallon. Aside from a lower price tag, LNG proponents also note that natural gas emits less carbon dioxide than oil fuels, hence it carries a “green label.”
While LNG costs less and is more environmentally friendly, it faces two key hurdles to wide-scale adoption as a fuel for trucks. For starters, there’s a lack of national infrastructure; a truck can’t pull into any truck stop across the United States and get LNG at most pumps. In addition, trucks using LNG or CNG for that matter come with a higher sticker price. A typical Class 8-type truck running on diesel costs between $100,000 and $125,000. An LNG-powered rig, on the other hand, commands at least another $50,000 in price and sometimes even higher depending on the additional features.
Despite those hurdles some pioneering trucking companies are starting to operate LNG-powered rigs along fixed routes. That way the motor carrier can make sure that when its LNG-powered truck stops along the way for refueling, a station carries LNG at the pump. In fact, some motor carriers running LNG equipment have even been willing to quote shippers a fixed rate absent of fuel surcharges for a certain period of time in exchange for the shippers agreeing to tender a guaranteed volume of shipments on a specific lane.
Although LNG-powered truck fleets are still in their early stages of deployment, it makes economic sense for electrical distributors to check around to find out whether any motor carriers in their distribution area are running rigs on this type of fuel. With the continued stress on shipping budgets due to high oil prices, it’s a shipping alternative that warrants investigation.
James Cooke is the editor of CSCMP’s Supply Chain Quarterly magazine, the premiere journal of global thought leadership for supply chain professionals. He has been writing and reporting on the best practices in supply chains for more than 30 years.Tagged with tED