When to buy a car running on natural gas

Cries of pain are heard at gasoline stations all around the nation as the price of a gallon of regular unleaded is close to $4 again. It's time to get used to it: 2012 is the year that oil consumption of OECD countries is surpassed by that of non-OECD countries. China is ready to add 125 million cars to its roads in the next five years, and all those extra cars will compete for the same pool of oil with everybody else's cars on the planet.
Remember Economics 101? Supply same, demand up: price up.

On the other hand, natural gas is starting to look more and more attractive. Whatever your opinion of modern fracking methods, they are effective at unlocking the vast reserves of natural gas in ancient North-American shale deposits, and that success is reflected in the steadily declining price of gas. Natural gas that is, mostly a mixture of methane (CH4) and ethane (C2H6).

Just in time for this conundrum (also, it's an election year), the Obama administration is proposing a $10,000 tax credit for consumers buying a car running on alternative fuels. That includes electricity, hydrogen, and natural gas.

It so happens that I was at the local Honda dealer earlier this week, getting answers to my questions about the reality of ownership of a car running on compressed natural gas (CNG). So I will use as an example the Honda Civic. Its CNG version does 31 miles per GGE (gasoline-gallon equivalent) and the MSRP is from $26,155. In comparison, the basic gasoline version (few bells and whistles) that I would normally gravitate to, gets 32 mpg and starts at $15,805.

Pros of CNG: Natural gas is still a fossil fuel, but CNG cars run cleaner than gasoline cars on all emissions. And natural gas is inexpensive:  currently $2.40 per GGE at a public recharging station.

Cons of CNG:  There is a higher price tag.  The Honda Civic CNG is about $12,000 more expensive than the basic gasoline Civic, if you include the $1500 navigation package that helps you find recharging stations.  And those recharging stations are far from ubiquitous:  the one nearest to my house is 25 miles away.  If I were to buy a CNG car I would have to get a home recharging station, which runs around $5000 including installation to hook it up to my existing natural-gas line.  That would bring the total price difference up to $17,000.

Is the higher price tag worth it? - It depends.

IF the $10,000 tax credit comes through, AND you live close to a CNG station then a CNG car would be less expensive over its lifetime (assuming you keep driving it for 150,000 miles, the average retirement mileage for US cars). Buy the CNG car;  and when gasoline goes above $5/gallon, you would be way ahead.

Without the tax credit, AND having to install a compressor at home (but you would pay even less than $2.40 per GGE for your natural gas), the breakeven point occurs when the price of regular unleaded is $4.90 per gallon.  That is to say, when gasoline prices rise above that, it's cheaper to own the CNG car;  this is again assuming that you drive the car for 150,000 miles (and that the price of natural gas remain at today's level).

If you want to see how a CNG car would work out money-wise for your particular situation (and for your own guess as to how gas prices will move in the coming decade), I refer you to my original post at cellomomcars.com.

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