UPS (NYSE:UPS) will be expanding its fleet of natural gas-powered vehicles in the U.S. It plans to purchase upwards of 700 liquefied natural gas (LNG) vehicles by 2014. It also will construct four refueling stations.
An investment of roughly $18 million will be made for the endeavor, which will accelerate the company’s growth as an alternative vehicle operator.
UPS already has 112 LNG tractor trailers out on the road using fueling stations in Las Vegas, Nevada; Phoenix, Arizona; and in Beaver and Salt Lake City, Utah. It also has its own station on its property in Ontario, California.
The company has been using natural gas vehicles for over a decade now, and since gas prices are 30 to 40 percent cheaper than imported diesel, as Sustainable Brands notes, UPS is perfectly positioned to lead the way in a conversion to the use of natural gas.
U.S. natural gas production is thriving, setting UPS up to aggressively invest in infrastructure for its delivery service here in the states and making natural gas more accessible. This will also allow the company’s vehicles to burn a cleaner fuel with lower greenhouse gas emissions.
Around the globe, UPS already uses over 1,000 natural gas vehicles and plans to have another 700 in the U.S. by next year, joining a worldwide fleet of roughly 2,600 alternative fuel vehicles—including all-electric, electric hybrids, hydraulic hybrids, propane, CNG, and biomethane.
The newly constructed fueling stations will be in Knoxville, Nashville and Memphis, Tennessee, and in Dallas, Texas. These stations will allow the company to extend its territory in routes through Dallas, Houston, and San Antonio.
Upon completion of the project, UPS will solidify its fleet as the most extensive private LNG fleet in the U.S.
Time to Expand
In recent years, as the shale boom has exploded in places like the Bakken in North Dakota and the Eagle Ford in Texas, production of natural gas has made prices inexpensive, leaving many to argue that the country’s commercial and transitory systems should be weaned off foreign oil and instead lean on domestically produced natural gas. It’s cheaper, cleaner, and it’s right here at home.
It can save truckers around $1.50 a gallon and emit 25 percent less CO2. It can also help avoid any geopolitical issues that can drive up petroleum prices.
The ability for natural gas to create lower greenhouse gas emissions has made it a talking point on Capitol Hill, but a lot of truckers are saying that natural gas vehicles still cost too much and the initial cost for the transition to change isn’t worth the overall savigns.
But things can be done.
“Public-private partnerships and legislative action can remove disincentives from fuel taxes on natural gas as well as offset the higher incremental costs of the vehicles to create the favorable conditions for companies like UPS and others to broaden deployment,” said Scott Davis, UPS Chairman and CEO, according to The Wall Street Journal.
It would also cut the country’s bill on oil imports. Heavy and medium-sized trucks consume roughly three million barrels of oil consumed each day, according to The New York Times, equating to about 15 percent of the total daily consumption; three-fourths of this is imported from members of the Organization of the Petroleum Exporting Countries (OPEC).
Still, the switch to natural gas has been a slow one in the U.S. Other parts of the world are more accepting and willing to make the change. Part of that has to do with the incentives—it still costs almost twice as much for a natural gas vehicle compared to a conventional one, and there aren’t enough fueling stations to make it a convenience.
If incentives on the state and federal level are made, and tax credits and grants are provided to motivate fueling station installations, then more and more companies will be willing to take the leap forward.
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Making the Move
Some companies, like Procter & Gamble (NYSE:PG), recognize the potential and see the benefits of turning to a company with natural gas trucks in its fleet. It gives it that green credential—a symbol of health that has become so important to many of today’s consumers.
Other big name brand manufacturers see the same benefits and are pushing for companies that carry a green status symbol. Nike (NYSE:NKE) and Walmart (NYSE:WMT) want their products transported by natural gas vehicles.
And this is prompting not only UPS but its biggest competitors like FedEx (NYSE:FDX) and Ryder System (NYSE:R) to start exploring the option.
Truck manufacturers, too, are starting to bring natural gas vehicles to market: Navistar (NYSE:NAV) and Volvo (OTC:VOLVY) both have plans to offer long-haul natural gas vehicles.
And this month, Cummins Inc. (NYSE:CMI), an industry leader in engine manufacturing, began shipping an engine specifically designed for the use of natural gas. This engine has been designed and produced in a joint partnership with Westport Innovations (NASDAQ:WPRT), an engine and fuel system technologies company. UPS will use this new engine for its vehicles.
As for fueling stations, Clean Energy Fuels (NASDAQ:CLNE) has positioned 70 stations along major routes nationwide, many at truck stops operated by Pilot Flying J.
A move into natural gas is the future of fuel here in the U.S. And many major companies are beginning to realize it. It gives America a little bit of our independence back, and it’s good for us and for our planet. And UPS is leading the charge.
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