Natural-Gas Cars Can Drive Us Toward a Better Economy
Comment of the Day

June 27 2012

Commentary by Eoin Treacy

Natural-Gas Cars Can Drive Us Toward a Better Economy

This is an interesting article by Peter Orszag for Bloomberg which may be of interest to subscribers. Here is a section:
A measure recently considered in Congress, the New Alternative Transportation to Give Americans Solutions Act, is aimed at this chicken-and-egg problem. It would, among other things, provide a 50 percent tax credit, up to a maximum of $100,000, for installing natural-gas filling stations and also encourage people and companies to buy more natural-gas vehicles.

The Natgas Act is a rare piece of legislation these days --it would not only address an important problem but do so sensibly, with bipartisan backing. (It is languishing in Congress partly because other industries that benefit from low natural-gas prices oppose it; they don't want transportation competing for the resource.) Still, given the potential benefits for energy policy and the economy, the Natgas Act should be even more ambitious.

Eoin Treacy's view Unsurprisingly, the glut of natural gas coupled with extraordinarily low pricing compared to alternatives has prompted new sources of demand to appear. Natural gas as a transport fuel has been around for quite some time but never gained traction while supply growth was uninspiring and gasoline was relatively cheap. Both these limiting factors have changed substantially over the last decade and natural gas is now entering a renaissance in terms of how it is viewed by consumers. (Also see Comment of the Day on May 23rd).

Consumers will be some of the primary beneficiaries of investment in natural gas transportation infrastructure and innovation in the design and manufacture of vehicles. However the companies engaged in natural gas power-train manufacture are industrially oriented and respond to perceptions of global growth. Paccar (2.1%) for example lost uptrend consistency from June 2011. While the rally from the October low unwound almost the entire accelerated decline, it encountered resistance in the region of the lower side of the overhead top formation. The share retested the December low four weeks ago and will need to hold above $35.50 if potential for a further bounce is to remain credible. Industrially oriented shares probably require perceptions of the potential for global GDP growth to improve in order to stoke medium-term demand dominance.

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