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Natural Gas Vehicles Driving in a Vicious Circle
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The U.S. is in the midst of a natural gas boom, thanks to new forms of technology that make it possible to reach this resource in areas where it was previously unattainable. As a result, in 2012, the price of natural gas dropped to its lowest point in a decade. Companies across the nation found many uses for the flowing resource, which included fueling vehicles. Unfortunately, natural gas vehicles are taking much longer to catch on than manufacturers had originally predicted. With the price of gasoline rising, as well as the efficiency of natural gas, why aren’t more people investing in natural gas as a fuel for transportation?
Yes, the initial cost of a natural gas vehicle may discourage some consumers from purchasing, but there is another underlying reason for the sluggish sales. Take a second to think about how many natural gas refueling stations are in your town…exactly. Consumers realize that there are only a limited number of these stations in any given city, meaning that they would probably have to drive out of their way just to refuel their car, so they don’t buy them. On the other hand, companies see that only a small amount of people are buying these vehicles, so they have little incentive to build more refueling stations. It’s a vicious circle!
Christopher Knittel, professor of energy economics at MIT, published a paper where he discusses this situation:
This creates a chicken-and-egg problem, or network externality issue. Consumers are unwilling to purchase natural gas vehicles before a refueling infrastructure is built, but businesses will not invest in natural gas refueling stations until there is consumer demand. Each side would be better off if the other side acted first, but neither is willing to move without the other.
Manufacturers have discovered that one way to circumvent this problem is to create vehicles that have the option to run on compressed natural gas or gasoline. Some vehicles that are taking this route are the Ram 2500 Heavy Duty CNG Truck, the 2013 Chevrolet Silverado 2500HD, and the GMC Sierra 2500HD.
The obvious benefit of having a dual fuel car is the ability to enjoy the advantages of efficient natural gas while also having the option to fill up with regular gasoline if need be. But don’t expect these vehicles to be popping up more frequently; there are still not enough fueling stations across the country to encourage consumers to go out and make a purchase.
Chairman and CEO of General Motors Daniel Akerson believes the government should take control of the situation and encourage natural gas refueling stations. “Why can’t we get natural gas refueling stations at one out of four gasoline stations?” He added, “If you really want to take advantage of a gift, you have to change your infrastructure.” Akerson explained that he would like to see a presidential mandate that would develop and integrate an energy plan, seemingly one that would include some sort of incentive for these refueling stations.
Companies need to stop fighting this movement toward a cleaner society. With natural gas vehicle production almost at a standstill, companies need to begin building the necessary infrastructure to encourage more consumers to purchase these efficient vehicles. As a step in the right direction, residents in Madison Wisconsin, Fairborn Ohio, and Jacksonville Florida will be seeing new natural gas refueling stations very soon.
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