While coal, natural gas and renewable fuels regularly substitute for each other in power generation, oil has traditionally been immune from price competition because of the lack of widely adopted alternatives to kerosene, diesel and petrol in plane, train and car engines.But Mr Morse expects the lower gas prices and plentiful supplies unleashed by the US shale revolution to lead to the adoption of compressed natural gas and liquefied natural gas vehicles.
The global benchmark for oil, the Brent crude price, has plummeted more than 15 percent since February. It’s now hovering at just above $100 per barrel, and if natural gas starts to eat away at oil’s dominance of the transport sector, oil prices are going to continue to fall.That’s good for consumers, as Gal Luft and Anne Korin wrote for TAI a while back. Two energy sources competing with one another will bring down prices at the pump. Companies will probably be the first to scale up use of cars and trucks capable of running on compressed or liquid natural gas. Since corporate fleets generally fill-up at designated stations, they will be less affected by the current lack of infrastructure for CNG and LNG.What’s good news for consumers is bad news for OPEC. Many regimes around the world rely on high oil prices to keep their budgets balanced and their people happy. A lower price of oil isn’t just devastating to OPEC member states’ economies; it will threaten the longevity of their political leaderships.There’s still a lot that could go wrong here. The infrastructure to make this transition still needs to be built out, and more vehicles capable of running on natural gas will need to be sold as well. But whether it’s used to power American cars or compressed and sold on the global market, US shale gas is a threat to oil producers and the countries that rely on those producers—and that’s good news for America’s energy future.[Compressed natural gas fill-up image courtesy of Wikimedia]