"Natural gas is a better transportation fuel than gasoline, so if that's the case, it's cheaper, it's cleaner, and it's a domestic resource."
-- T. Boone Pickens
More and more these days, America's police departments are finding themselves nodding in agreement with uberinvestor T. Boone Pickens, the man who wants his natural-gas-fueling chain, Clean Energy Fuels (NASDAQ: CLNE ) , to power the cars and trucks of tomorrow. With natural gas for automotive fuel use currently costing just half the price of "real" gasoline, police departments around the country are converting their cruisers to natural gas.
But are they right to do so?
A few weeks back, a posting on the website for America's Natural Gas Alliance described how the local police department in Conway, Ark., has begun converting its officers' Chevy Tahoes to run on compressed natural gas (CNG). They're taking advantage of Southwestern Energy's (NYSE: SWN ) decision to open two CNG filling stations in the area, part of a growing trend toward automotive fuel agnosticism.
General Motors (NYSE: GM ) , the Tahoe's manufacturer, does make some cars and trucks capable of running on CNG from the git-go, but these particular vehicles were not. So, down in Conway, the coppers have been tweaking the Tahoes to run on CNG in hopes of fueling up on the alternative fuel at a cost of $1.50 for the equivalent of a gallon of gasoline rather than paying full freight on gasoline that costs $2.95 a (real) gallon.
They're not alone.
In Trussville, Ala., Mayor Gene Melton recently told reporters that he expects to save "$17,000 a year per vehicle over the next five years" by converting the local PD's fleet of 32 Tahoes to run on CNG. He's probably a bit overoptimistic about that figure, which would imply his Tahoes are burning $34,000 a year in gas -- each -- annually. That would be about 10,000 gallons per SUV -- and even the Tahoe's gas mileage isn't that bad. (According to a blog reporting the news, converting the vehicles is costing the city $10,000 to $11,000 per vehicle.)
But the good mayor's apparent misunderstanding is really beside the point. The real thing is that around the country police departments are searching for ways to rein in their fuel costs. Encouraging the trend, natural gas engine specialist Westport Innovations (NASDAQ: WPRT ) and car producer Ford (NYSE: F ) are teaming up to offer free "gas" for customers who replace entire fleets with CNG-burning vehicles.
But even so, this may not be the best way to save money on fuel.
The hybrid revolution is still the best revolution
Don't get me wrong. At present day prices, it is cheaper to run police vehicles on CNG. At $1.50 per gallon equivalent, CNG is roughly half the cost of gasoline. But the cheapest way for coppers to burn rubber is still with an internal combustion engine (ICE) burning gasoline ... paired with a hybrid electric system.
Hybrid gas-electric vehicles such as the Toyota Prius or Ford Fusion now in use at the Athens, Ga., police department cost more than equivalent internal-combustion-engine-only vehicles. Likewise, departments switching to CNG must pay some money upfront to convert their ICE cruisers to run on that fuel. But the advantage hybrids have is that there's an almost immediate payback on a conversion to hybrids -- and less risk that a department will be caught out of step if and when CNG prices start to rise again.
A report out of the Urban Institute in February estimated that police departments buying a hybrid cruiser save as much as 63% on their fuel costs annually. (In Athens, the savings are about $2,500 per cruiser, per year). Maintenance costs on the vehicles are estimated to be 57% lower, as well. Here's how the figures look, according to the Urban Institute:
Averaged together, therefore, a hybrid police cruiser could represent savings of as much as 58% in comparison to an ordinary ICE vehicle, saving nearly $5,000 in annual operating costs. That's enough to pay for the price premium on a hybrid cruiser, versus an ICE cruiser, in the very first year.
On the other hand, you figure that the average police car racks up 20,000 miles a year at, say, 20 mpg, that's perhaps $1,500 a year in savings (figuring CNG costs $1.50 per "gallon" less than gas, and 1,000 gallons consumed in a year). So, assuming Urban Institute's data are kosher, hybrid vehicles offer savings roughly three times as great as CNG.
Result: Converting to CNG is one good way for a police department to rein in fuel costs. But buying hybrids in the first place is still a better one.
Oil or natural gas? Why not both?
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free.