The United States has an abundance of natural gas supplies. Some estimates suggest we have enough in reserve to supply our economy for more than 100 years. What we don't have is an ample supply of oil, and we're up against stiff global competition for every barrel that's produced. That mix of tight supplies and increasing global demand is the economic recipe for higher prices.
This trend, when combined with what I'm about to point out , will put significant pressure on our nation's trucking fleets in the coming years. That's because demand for the diesel used to fuel those fleets is rapidly increasing around the globe. As the chart in the bottom right corner of the following slide shows, demand for diesel is growing at twice the rate of gasoline.
Diesel's growth rate is creating an incentive for U.S.-based refiners such as Valero (NYSE: VLO ) and Phillips 66 (NYSE: PSX ) to increase production of the fuel. That incentive is amplified by the fact that it's much more profitable to produce diesel, as the chart on the left of the preceding slide indicates. It's probably not surprising that Valero and Phillips 66 are both investing to increase access to world export markets. What this means is that diesel's price will continue to be driven by global demand.
The following slide shows how quickly Phillips 66 is expanding both its export capacity and the volumes it is exporting. Further, note that distillates such as diesel currently make up most of the export volume.
Given how fast diesel demand is growing, exports are going to put a floor under the price of the fuel as more makes its way into world markets. That's just one more reason it makes sense to use natural gas instead of diesel to fuel our nation's trucking fleets.
Leading the way to make that a reality is Clean Energy Fuels (NASDAQ: CLNE ) . The company is building America's Natural Gas Highway, a network of 150 truck refueling stations along the interstate highway system. As the following slide points out, the cost savings by switching from diesel to natural gas is a big economic advantage.
As a nation, there are a lot of trucks that could be fueled through this switch. In fact, there are currently 3.2 million Class 8 trucks on the road, which consume 25 billion gallons of diesel each year. On the other hand, only 1,700 trucks have converted to natural gas, which suggests a phenomenal future opportunity.
The bottom line: The economic savings of switching to natural gas could make even more sense in the future as diesel exports continue to pick up. That's why I say we let other countries have our dirty and expensive diesel. I'd much rather see our nation make a concerted effort to get off imported oil and make better use of the clean and abundant natural gas we have here at home.
More on America's no-choice energy revolution
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