Natural Gas Prices Drop: Big Oil's Role


Apparently the earth does have a coping mechanism to help with global warming. This winter, it was too warm to burn as much natural gas as was projected. All of our carbon footprints were decreased this year. Oh no, now we have a glut of natural gas.

Okay, with the blood of natural gas and with America still importing all that gasoline and oil, maybe we should switch our cars over to natural gas. This was the idea that Mr. Pickens put forth and why he invested so heavily in wind farms. The idea didn't go over so well. Perhaps we can find out why.

First let's look at the technical challenges. According to popular mechanics, there aren't any. But there are a few, let's call them regulatory challenges. Someone who has the technical skill to tune up their own car is probably capable of installing all of the necessary material to make that car run on natural gas. Unfortunately, that would be illegal. This backyard mechanic would run afoul of the clean air act that's supposed to support this kind of change. It's highly likely that the intrepid backyard wrench turner would be fined up to $5,000.

I do know that here in Utah, where I live, there was a great deal of interest in installing natural gas into cars in 2007 and 2008. But a controversy arose when it turned out that the only “certified” entity that could legally install natural gas conversions was the natural gas company. There were some 10 or 15 private companies attempting to install natural gas conversions and when the cars came up for inspection. The inspections were refused because the conversion was not done by Questar gas. A year and a half later, that controversy was resolved through an act of the state legislature. 

But in the meantime all of those outside companies went out of business. Now the cost is between $12,500 and $25,000, and once again the only entity that will do the installation is Questar gas. With prices like these and only a two dollar difference in the price of a gallon of gas an equivalent amount of natural gas, it will take a lot of miles to make up that initial investment. If we assume your car gets 15 miles to the gallon, then you get a return on investment of two dollars for every 15 miles. You'll break even in 90,000 miles when it costs $12,500 to do the upgrade.

Now why would Questar gas shoot themselves in the foot like that? Aren't they in the business of selling natural gas? And obviously having cars as a new market would greatly increase their sales. The answer reveals itself when look at their board of directors, and when I realize where most of the natural gas comes from. The Board of Directors of Questar gas is made up of men in the oil business. Most of the natural gas in the United States comes in as a result of drilling for oil. Obviously there's more money in oil and gasoline than there is in natural gas, and the Board of Directors was only acting in its own best interest. That best interest has now caused a major glut in the natural gas market.

If these legislative and financial blocks are being put in the way of the fuel system that will benefit the oil and gas industry, what kind of campaign is being waged to prevent the adoption of a fuel system that won't benefit the oil and gas industry? If Mr. Pickens had been listened to six years ago, we might all be driving natural gas cars now, and this glut of natural gas would never have occurred. Instead, we would be suffering from mild shortages that could be made up by importing a little gasoline. Significantly less gasoline than we're importing today. There's no one on the planet who will tell you that our national interest is being served by importing more oil. To import less oil we need to change something today that will have no noticeable effect for several years. Isn't it time we started?