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Cheap Fuel and the Company Car

If you want to understand the modern economics of domestic energy, just ask Willie Sutton. When asked why he robbed banks—making off with an estimated $2 million over his career—he famously replied: "Because that's where the money is."

The quotation is, sadly, apocryphal—the fictional non-fiction of a brilliant and forgotten reporter.

But it has persisted as a bumper-sticker reminder of the underlying truth that supply can drive demand just as powerfully as the reverse.

 

Today, what is in great supply in the U.S. is natural gas, including from vast potential supplies in previously untapped shale formations. President Barack Obama has identified this opportunity as an essential pillar in his "all-of-the-above" energy platform.

The net result is domestic natural gas prices on the lower end of the historical range. And this development has not gone unnoticed by local governments and the many U.S. businesses—inside and outside of the energy sector—seeking their own versions of an "all-of-the-above" approach to controlling costs and boosting productivity.

The Adoption of Natural Gas Vehicles

One of the most significant effects has been a spike in the adoption of natural gas vehicles (NGVs) by industry and the public sector, which operate and maintain nearly 11 million fleet vehicles in the U.S.

According to the U.S. Department of Energy, NGVs are particularly suited for high-mileage, centrally fueled fleets. And the cost of natural gas for vehicle fuel has fallen nationwide by 17 percent, on average, in the latter half of the past decade, according to the most recent reporting by the U.S. Energy Information Administration. This includes costs falling by more than half in states like Idaho, Massachusetts, New York and Florida.

While NGVs and the boom in natural gas are just one chapter in the U.S.'s evolving approach to energy, the experience of industry and the public sector provides a window into what a future of new energy sources may look like.

A Shipping Company Delivering Savings

Atlanta-based United Parcel Service, one of the world's biggest courier companies, depends on cost-effective transportation to deliver more than 4 billion parcels to 8.8 million customers every year. As a result, the company is increasingly turning to natural gas to fuel its vehicle fleets. As part of an ambitious sustainability goal to record one billion miles driven by alternative or advanced technology vehicles by 2017, UPS announced plans to purchase 1,000 NGVs over the next two years, bolstering a fleet which already includes 2,745 alternative-fuel vehicles.

In July, UPS chief sustainability officer Scott Wicker estimated that the adoption of NGVs could lead to potential fuel cost savings of 40 percent.

An Energy Firm Ensuring Efficiency

The transition to NGVs is also well underway at many natural gas producers. Apache, headquartered in Houston and one of the world's largest independent oil and gas exploration and production companies, is currently engaged in a long-term effort to convert its corporate fleet to run on cleaner-burning natural gas. Over the past several years, Apache has converted hundreds of vehicles and is opening public fueling stations, an approach other natural gas producers such as Cabot and Range are also pursuing.

The result: Cost savings which have impressed Apache president Roger Plank so much, he's been quoted as comparing fueling vehicles with natural gas to "printing money."

The Town Hall Approach

It isn't just the private sector that is turning to natural gas to serve its transportation needs. In Redlands, California, home to nearly 70,000 people, the city government is buying NGVs as part of a comprehensive effort to boast a cleaner municipal fleet. In fact, the most recent purchase means that 75 percent of the San Bernardino County municipality's solid waste is transported to landfills on NGVs. The city, located about 60 miles to the east of Los Angeles, also plans to continue investing in new NGVs every year.