According to United Parcel Service (UPS 0.42%), "In 2012, liquefied natural gas vehicles finally became a viable option worthy of broad-scale deployment..." That's a good thing because the president is now calling for tighter fuel-efficiency standards for the nation's trucking fleet. That will most likely mean an increase in the number of natural-gas powered trucks riding the nation's streets and highways
Saving money, diesel, and maintenance costs
Natural gas is a relatively clean burning fuel, so it has clear environmental benefits over gasoline and diesel. Although the price of natural gas has ticked higher because of tough winter conditions, it is still relatively cheap. The low price is why UPS is in the process of buying 1,000 LNG trucks. It expects to save up to 40% of fuel costs, though that obviously will vary with the price of natural gas.
Waste Management (WM 2.50%) also points out that using the cleaner-burning fuel helps reduce maintenance costs. So as UPS and Waste Management have led the way on this shift, they are saving on fuel costs, reducing emissions, and cutting maintenance expenses. That's a great reason to switch to natural gas, but the president looks like he wants to give truck operators even more incentive.
However, what won't vary is the fact that natural gas is cleaner no matter how much it costs. For example, Waste Management, which has been slowly switching its garbage-truck fleet over to the fuel for years, estimates that it avoids the purchase of 8,000 gallons of diesel for every natural-gas powered truck it buys.
Setting up for the fat pitch
Clean Energy Fuels (CLNE -2.24%) has been preparing for this shift for several years now. Although the company is losing money, a big part of that is due to its efforts to build a countrywide natural gas fueling network along the nation's interstate highway system. It has more than 120 such stations but is also a big player in local markets. For example, it has deals to fuel compressed natural gas trucks, used more for local routes, with companies like PepsiCo's Frito-Lay division.
So, as new rules get announced and start to take effect, Clean Energy will be in prime position to fill more natural gas tanks. And, equally important, it has a broad reach, with operations in 43 states. Although the company's losses are likely to continue while it builds out the infrastructure it needs, the long-term potential appears impressive. Clean Energy believes the long-haul opportunity alone is worth about $25 billion.
But Clean Energy isn't the only company that will benefit. For example, truck manufacturers Navistar International (NAV) and Paccar (PCAR 0.13%) both offer natural-gas powered trucks. When new fuel-efficiency rules go into effect, there's likely to be a new round of truck buying as customers upgrade their fleets to comply with higher standards.
Any help would be welcome at Navistar, which has been bleeding red ink for years. Paccar, with its highly respected Peterbilt and Kenworth brands, has been solidly profitable, so it doesn't need any extra push -- but it would clearly be happy if truck sales were pushed above historical averages by a rule change.
Not a whole new world
While there will likely be big headlines following any new truck-emission rules, there's already an infrastructure in place to support a shift toward natural gas.
Clean Energy, for example, is way out ahead of the curve on supplying the fuel. Truck companies are increasingly offering heavy-duty natural gas trucks, including Navistar and Paccar. And more and more large companies like Waste Management, UPS, and PepsiCo are taking the plunge, saving money and reducing emissions. When new regulations do come out, there will be plenty of ways for investors to benefit and an already existing groundswell of supporters.
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