Bill Manzi.com

One of the main points of the Pickens Plan is to begin fueling our auto fleet with natural gas produced domestically to replace foreign oil. This has begun happening in Utah, where the demand for natural gas vehicles is eclipsing supply, and where natural gas stations selling to the public are in high demand as well. Pickens has made this a major part of his plan, and I was not at all familiar with this technology. Yesterday’s New York Times jumps in and writes a great story on the Utah experience. From the Times:

Ron Brown, Honda’s salesman here for the Civic GX, the only car powered by natural gas made by a major automaker in the country, has sold one out of every four of the 800 cars Honda has made so far this year, and he has a pile of 330 deposit slips in his office, each designating a customer waiting months for a new car.

“It’s nuts,” Mr. Brown said. “People are buying these cars from me and turning around and selling them as if they were flipping real estate.”

The price differential between natural gas and gasoline is enormous, especially in Utah.

Advocates for these cars see Mr. Brown’s brisk sales as a sign that natural gas could become the transport fuel of the future, replacing much of the oil the nation imports. While that remains a distant dream, big increases recently in the country’s production of natural gas do raise the possibility of making wider use of the fuel.

To a degree, it is already starting to happen in Utah, where the cost savings have gotten the public’s attention. Natural gas is especially cheap here, so that people spend about 87 cents for a quantity of gas sufficient to propel a car approximately the same distance as a $3.95 gallon of gasoline.

From the perspective of the consumer that is a big differential. From the perspective of the country getting away from foreign oil is the key. And just mentioning potential like this can have some impact on oil pricing.

It is true that Utah has some special factors that have made this very attractive there, including “natural gas stations” all over the state run by the states gas utility. The price is controlled in Utah, and the differential in price would likely be less in other states. But it has potential. And it is cleaner, with less greenhouse emissions.

In fact, some unique factors apply in Utah. Natural gas prices at the pump here are controlled and are the cheapest in the country, while the price of conventional gasoline is one of the highest. Questar Gas, the public utility, has compressed-gas pumps around the state open to the public, a fueling infrastructure that few states can match.

Special factors or not, the sudden popularity of natural gas vehicles here demonstrates their potential, according to advocates like T. Boone Pickens, the Texas oil billionaire who is financing a national campaign promoting wind power and natural gas to replace imported oil. “Utah shows that the technology is here and the fuel works and the fuel is better than foreign oil,” Mr. Pickens said.

Natural gas cars produce at least 20 percent less greenhouse gas per mile than regular cars, according to a California study.

The Times piece points out some of the problems, but none are insurmountable.

The cars have two major disadvantages — a shortage of fueling stations and limited range. (A typical natural gas car goes half as far on a full tank as a gasoline car.) Utah is one of the few states where a driver can travel across the state without being out of range of a station.

The situation is a Catch-22: Carmakers do not want to make natural gas cars when few filling stations are set up for them, and few stations want to install expensive equipment to compress gas with so few cars on the road.

Hundreds of stations supply compressed gas in a few states like California, New York and Arizona, but most are either closed to the public or charge only modestly less than regular gasoline prices.

Retail natural gas prices in some states are triple the price in Utah. The only state that comes close to Utah’s low gas prices is Oklahoma, and a surge of natural gas car buying is going on there, too.

Some states and the Congress are looking at ways to widen this use.

A proposal on the ballot in California this fall would allow the state to sell $5 billion in bonds to finance rebates of $2,000 and more to buyers of natural gas vehicles. Legislation has been introduced in Congress to offer more tax credits to producers and consumers and mandate the installation of gas pumps in certain service stations, with the goal of making natural gas cars 10 percent of the nation’s vehicle fleet over the next decade.

We do have some alternatives to the chanting of drill here and drill now. Pickens is showing that. But we need some leadership, and the willingness to be bold and innovative. What we are doing today is neither.

Read the Times story here.