Rising Diesel Prices and Regulations Pave the Way for NGVs
September 12, 2018
Rising diesel prices once again are capturing headlines across the nation, which could wreak havoc on already thin-operating margins for the logistics industry
Recently, the International Maritime Organization (IMO) announced it will begin limiting the amount of sulfur in fuel oil used aboard ships from 3.5% to 0.5% beginning January 1, 2020, with the intent of reducing emissions. Approximately 121,000 board ships would be impacted by this new regulation and have several options to comply, with the most economical decision being to transition to a low-sulfur fuel.
How does this impact the heavy-duty trucking industry, you might ask? As ships seek compliant low-sulfur fuel, the demand for diesel spikes, according to the IEA. This supply pressure, in conjunction with already rising diesel prices, could send prices to potentially $90/barrel, according to leading analysts for both Bank of America and Morgan Stanley (see chart). Diesel users are accustomed to a certain degree of price volatility, but this type of increase will certainly challenge operation margins for fleets, nationwide.
In addition to cost increases, looming air quality regulatory changes, as seen in progressive areas such as California, further detract from the diesel value proposition. Many fleets are exploring compliant options, comparing cost implications of either upgrades to existing vehicles, even outright new vehicle purchases.
Ultimately, fleets need to consider what their future fuel plan looks like. In many cases, alternative fuel provides both pricing security and regulatory compliance. However, the alternative fuel space is much more complex than it was several years ago – natural gas, electric, hydrogen and propane all have corresponding value propositions, leaving fleets to figure out the right option(s) for their applications.
The good news – natural gas, both compressed (CNG) and renewable (RNG), is by far, the most established alternative fuel, widely adopted by trucking, refuse, transit and municipality fleets throughout the world. It’s your easy-button choice for alternative fuel cost savings and emission reductions.
Cummins Westport recently upgraded their offering of natural gas vehicle (NGVs) engines to address performance issues in their prior models, as well as provide unbeatable emission reductions. Pairing the new Cummins Near-Zero (NOx) engines with RNG can deliver up to 125% greenhouse gas (well-to-wheel) emission savings – the cleanest, available heavy-duty solution. NGVs are available through leading OEMs like Freightliner and Kenworth, in both 9- and 12-liter configurations.
NGV infrastructure is developed, accessible and reliable, with more than 1,200 stations and growing. Fleets have the luxury of choosing between public and private fueling locations. Most stations feature similar fuel time to that of diesel, 24/7/365 service if drivers should need assistance and close to 100% uptime.
Governments realize the positive impact natural gas vehicles can have on air quality levels across the nation and have therefore allocated funding to decrease the incremental costs of NGVs and infrastructure. Through a variety of federal, including the VW Environmental Mitigation Trust, and state programs, fleets can secure funding necessary to support expansion with NGVs.
Historically, natural gas has offered fleets benefits including a $0.50/gge alternative fuel tax credit and price stability. RNG specifically can further reward your fleet through the Renewable Fuel Standard (RFS) program – generating financial credits for use. North America, which leads in natural gas production, experiences several indirect cost savings such as energy security through a reduction in foreign oil and a boost to local economies through job creation.
As diesel prices continue to experience price volatility and are subject to supply pressures from the changing IMO regulations, natural gas presents a business case that is hard to ignore. Pricing is stable, RFS credits are available, funding programs bridge incremental costs for vehicles and stations, engine technology is proven, and emissions are unbeatable.