Market News

 August 31, 2009
Cash for Clunkers - Redux?

 Mike Hogan, a columnist writing in the August 29, 2009 edition of Barrons On Line, reports the investment outlook for natural gas is about to get much brighter once Congress returns from its summer recess.

Apparently a new "Cash for Clunkers" program is in the works, one that will offer tax credits worth up to $12,500 on the purchase of new cars and trucks. The catch is that your new vehicle must run on natural gas -- compressed natural gas, or CNG, to be precise.

A Senate bill, the counterpart to the House’s NAT GAS Act, also would offer up to $64,000 in tax credits on fleet vehicles, and up to $100,000 to anyone opening a CNG filling station.

Notes Hogan, "Washington is beginning to wake up to the value of using this plentiful, homegrown fuel for transportation -- and that in turn could open up some intriguing investment opportunities."

Natural gas engines found in some American buses and fleet vehicles have a clear appeal, notes Hogan. A "gallon equivalent" of natural gas is about half the price of gasoline or diesel and produces about a third the harmful emissions. "And America is swimming in the stuff."

Even though Congress will have a lot on its plate after the summer recess - notably the Health Care issue, some of the politically influential fans cheering the Senate bill are former US President Bill Clinton, his former chief of staff John Podesta, former US Vice-President Al Gore and BP Capital Management Chairman T. Boone Pickens.

Pickens teamed up two weeks ago with another influential American business leader - Ted Turner, Chairman of Turner Enterprises Inc., - to make the case for expanded use of natural gas.

Writing in the Wall Street Journal, the two argued that long-term economic and environmental interests compel America to put a priority on energy independence and a price on carbon pollution. Natural gas and renewable energy are obvious sources for cheap, clean and reliable electric power and transportation fuels.

They stated "Adopting a "cash-for-clunkers" program in the utility sector can save money and reduce emissions right away by retiring the oldest, least efficient and most polluting power plants in exchange for modern gas-powered plants. New coal plants should be required to combine natural gas with the coal they burn, resulting in cleaner emissions, and every power plant should meet strict carbon-emissions standards."

They also argued that in the transportation sector, renewable energy and natural gas can also be deployed immediately. For a quarter century, natural-gas vehicle technology has been available but stymied by lack of leadership. Of the 10 million natural gas vehicles in the world, fewer than 150,000 are in the U.S.

"We can begin transitioning the nation’s fleet of 6.5 million 18-wheelers that run regular routes. It would take just 20 refueling stations along a single highway to get trucks from one coast to the other. Centrally fueled urban business and government fleets also can quickly move to natural gas. The Ports of Los Angeles and Long Beach are in the process of buying new natural gas vehicles for their fleets, and many municipalities are harnessing the economic and environmental benefits of natural gas-powered buses. "

So compelling was the success of the Cash for Clunkers program in stimulating new car purchases and giving new hope to America’s much troubled auto sector, it would appear that the same formula may now be deployed to revitalize long distance trucking by switching to a lower cost, lower emissions fuel.

For More Information: Wall Street Journal On-line