Oil Prices & Natural Gas

By David Chapinski

PhD student, Rutgers University

How does the New Jersey natural gas proposal help in public management?

In many states, a local utility company within a protected service area controls electricity and natural gas supply and delivery.  Pricing guidelines and other controls are set and monitored by the state in which they operate but for the most part, customers do not have a choice in supplier or price.

Today, 28 states have deregulated the supply of energy, encouraging competition and offering customers a choice of supplier, price and contract term. Electricity and natural gas are traded on the open market as a commodity so prices fluctuate with the supply and demand just like stocks.  Depending upon your risk threshold, you may elect to lock into a guaranteed price for a specific length of time or you may choose another pricing plan and term that may fluctuate with the market in hopes of increasing your savings.

As a local natural gas distribution company, New Jersey Natural Gas (NJNG) provides regulated retail natural gas service to nearly 500,00 customers.  I believe what makes the NJ Gas Proposal unique is that the interest in natural gas vehicles has been growing from both the private and public sectors.  This is especially the case for organizations with large fleets, portions of public and private bus companies and trash haulers like New Jersey Junk Removal.

Fleets are replacing older, more highly polluted diesel and gasoline vehicles.  Sure, there are underlying and intertwined goals of ensuring economic and employment growth while encouraging energy efficiency but we must remember what tradition means for New Jersey.  The traditional reliance on petroleum-based fuels for transportation has accelerated security, economic, air quality, health and environmental challenges in our country on a whole. But in New Jersey we are seeing the need for addressing a proposal like NJNG in 2012.  I believe there is a need because NJNG committed to upgrading the Clean Natural Gas (CNG) refueling equipment of two company locations (Lakewood and the Maude Service Center). That work was completed by January 2012.

But why is it so terribly important for supporters to try and gain traction?

Recently, the New Jersey Board of Public Utilities (BPU) approved a proposal by New Jersey Natural Gas (NJNG) to implement a pilot program that would help stimulate the state’s natural gas vehicle (NGV) market.  Investing up to $10 million over the next 12 months, NJNG will build between five and seven compressed natural gas (CNG) refueling stations at host facilities throughout its service territory.

I have often wondered at the phenomena along the eastern seaboard, which seems to get hit harder than the rest of the country when it comes to rising petroleum prices.  Last year gasoline prices in New Jersey peaked in May when the average per-gallon cost reached $3.88.

I find it  interesting that prices actually jump annually in the spring or summer in New Jersey, as companies change the blend of fuels to meet federal requirements. This often signals that good news is sure to follow.

I also believe that New Jersey has potential to lead the way to price stability. I do not believe New Jersey residents, like myself, believe that gasoline prices will be as high as they were in Connecticut in 2011 at $4.20 a gallon in 2012. Even if they are, we can adapt because we made it through a very tough recession and are still standing together as a whole.

When we look at alternative scenarios for the future of energy in New Jersey, we must not lose sight of the U.S. Energy Information Administration (EIA) June release of our nation’s Annual Energy Outlook, 2012 (AEO2012).

In addition to the reference projections, consumption, technology, and market trends and the direction they may take in the future, the report also shows how New Jersey will be taking one ‘on the chin’ for a very long time if we do not prove to the rest of the country that installing company-owned refueling sites offer many advantages.  I feel that there has been much less major highway experimentation taking place on natural gas in New Jersey in the last decade.

If we take a look at Table 4-10 below, the numbers are still showing the disillusion there can be any quick turnaround through natural gas proposals. The number of total alternative fuels has basically increased less than 4 percent the year prior in 2007.

Table 4-10: Estimated Consumption of Alternative and Replacement Fuels for Highway Vehicles

 

2003

2004 2005 2006

2007

2005

2006

2007

2008

2009

 

2008

 

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

TOTAL fuel consumptiona

177,697,941

180,698.532

182,185,778

184,810,803

185,593,715

176,509,233 (R)

50

161,210,087

163,032,407

165,201,691

169,983,219

177,697,941

180,698,532

182,185,778

184,810,803

185,593,715

(R) 176,509,233

172,518,178

Alternative fuels, total

402,941

428,532

420,778

417,803

414,803

430,329

23,790

302,287

322,037

348,421

378,589

402,941

428,532

420,778

417,803

414,715

430,329

431,107

Liquefied petroleum gases

223,697

211,883

188,171

173,130

152,360

147,784

209,817

212,576

215,876

223,143

224,697

211,883

188,171

173,130

152,360

147,784

129,631

Compressed natural gas

133,222

158,903

166,878

172,011

178,565

189,358

72,412

79,620

86,475

104,496

120,670

133,222

158,903

166,878

172,011

178,565

189,358

199,513

Liquefied natural gas

13,503

20,888

22,409

23,474

24,594

25,554

5,343

5,828

7,259

8,921

9,382

13,503

20,888

22,409

23,474

24,594

25,554

25,652

Methanol, 85%b

N

N

N

N

N

N

1,212

1,073

585

439

337

N

N

N

N

N

N

N

Methanol, neat

0

N

N

N

N

N

449

447

0

0

0

0

N

N

N

N

N

N

Ethanol, 85%b

26,376

31,581

38,074

44,041

54,091

62,464

1,727

3,916

12,071

14,623

17,783

26,376

31,581

38,074

44,041

54,091

62,464

71,213

Ethanol, 95%b

0

N

N

N

N

N

59

62

13

0

0

0

N

N

N

N

N

N

Electricityc

5,141

5,269

5,219

5,104

5,037

5,050

1,202

1,524

3,058

4,066

7,274

5,141

5,269

5,219

5,104

5,037

5,050

4,956

Hydrogen

2

8

25

41

66

117

N

N

N

N

N

2

8

25

41

66

117

140

Other Fuels

0

0

2

2

2

2

N

N

N

N

N

0

0

2

2

2

2

2

Biodiesel

18,220

27,616

93,281

267,623

367,764

324,329

N

N

6,816

7,076

16,917

18,220

27,616

93,281

267,623

367,764

324,329

325,102

Oxygenates
Methyl-tertiary-butyl-etherd

2,368,400

1,877,300

1,654,500

435,000

0

0

,400

3,402,600

3,296,100

3,352,200

2,383,000

2,368,400

1,877,300

1,654,500

435,000

0

0

0

Ethanol in gasohol

1,919,572

2,414,167

2,765,663 (R)

3,729,168

3,729,168

4,694,304

500

950,300

1,085,800

1,143,300

1,413,600

1,919,572

2,414,167

(R) 2,765,663

3,729,168

4,694,304

6,442,781

7,343,133

Traditional fuels, total

177,295,000

180,270,000

181,765,000

184,393,000

185,179,000

176,078,904 (R)

4,360

160,907,800

162,710,370

164,853,270

169,604,630

177,295,000

180,270,000

181,765,000

184,393,000

185,179,000

(R) 176,078,904

172,087,071

Gasolinee

135,330,000

138,283,000

138,723,000

140,146,000

140,646,000

134,644,492

9,000

125,111,000

125,720,000

127,768,000

131,299,000

135,330,000

138,283,000

138,723,000

140,146,000

140,646,000

134,644,492

134,385,175

Dieself

41,965,000

41,987,630

43,042,000

44,247,040

44,533,000

41,434,412 (R)

,360

35,796,800

36,990,370

37,085,270

38,305,630

41,965,000

41,987,000

43,042,000

44,247,000

44,533,000

(R) 41,434,412

37,701,896

Expect NJNG’s natural gas proposal to make the necessary investments in CNG re-fueling infrastructure at locations where a company has or plans to use Natural Gas Vehicles, thus accelerating their development in the state of New Jersey for years to come and removing much older, more polluted diesel or gasoline vehicles from service. NJNG’s proposal will provide the necessary capital for constructing the re-fueling stations on the host company’s site, recovering those costs through the Clean Natural Gas Vehicle Infrastructure Program.

In other words, the company managing the quality assurance will also be required to make the Clean Natural Gas station available to the public. This is huge because we need accountability on a project of this magnitude in New Jersey.  By establishing the structure as such, I believe the Clean Natural Gas Infrastructure Program serves to accelerate the Natural Gas Vehicle market for both the anchor and company managing host area companies interested in moving away from traditional-based fuels, but unable to justify the infrastructure costs associated with installation.

Lastly, through the NJNG proposal and CNG Infrastructure Program, NJNG proposes to offer the managing company a turnkey Clean Natural Gas refueling station that will be available for their use.

———————————————————————————————————————————————————————

Total fuel consumption is the sum of Alternative fuels, Gasoline, and Diesel. Oxygenate consumption is included in Gasoline consumption.

b The remaining portion of 85% methanol, 85% ethanol, and 95% ethanol fuels is Gasoline. Consumption data include the Gasoline portion of the fuel.

c Excludes gasoline-electric hybrids.

d Includes a very small amount of other ethers, primarily tertiary-amyl-methyl-ether and ethyl-tertiary-butyl-ether.

e Gasoline consumption includes Ethanol in gasohol and Methyl-tertiary-butyl-ether.

f Diesel includes Biodiesel.

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