So why, we ask, are natural gas fuel prices so inexpensive and stable? A blog post on Cleanerenergyfuels.com explains what the author claims are the three main reasons: The 1st reason is tied to the abundant supply of natural gas in North America, particularly gas from the shale regions like the Marcellus and Eagle Ford shale regions in Pennsylvania and Texas that we saw on the EIA map. The 2nd reason is that most of natural gas consumed in the U.S. is produced in North America, by some estimates as much as 98%, making natural gas a more secure and stable source of energy since it is not tied to the ups and downs of global oil prices. The Pennsylvania Utility Commission also cited this statistic in a workshop on Natural Gas Vehicles in April 2013.2 The 3rd reason is that natural gas itself makes up less of the overall cost paid for a GGE.3 The Price at the Pump graphic illustrates the difference with the price for a gallon of gasoline being 70% commodity price while the CNG makes up only 20% of the cost of the fuel.
Because the actual price of the commodity makes up only a small portion of the cost of the retail price, even a spike in the cost of the CNG does not dramatically increase the pump price.
How CNG Prices are Calculated
To understand how the price of CNG is calculated for retail sale we must first take the wellhead price (which on Friday May 8 was listed at $2.73 MMBTU) and add retailer costs including:
Subtotal of costs: $1.30 - $1.60
All Costs except taxes based on 2013 average costs reported by NGV Day 5
Because the actual price of the commodity makes up only a small portion of the cost of the retail price, even a spike in the cost of the CNG does not dramatically increase the pump price.
How CNG Prices are Calculated
To understand how the price of CNG is calculated for retail sale we must first take the wellhead price (which on Friday May 8 was listed at $2.73 MMBTU) and add retailer costs including:
- Gas Commodity price per GGE plus a Pipeline/gas acquisition/marketer services + local gas company city-gate-to-meter service: ~$0.20-.25/GGE
- Compression (Electric motor KWH and KW): Nat’l range: $.04 -.30/KWH – Rates vary: average $.10/GGE
- Maintenance and repair costs for CNG facility: $.30-.65/GGE.: ~$.40/GGE
- Capital/ Equipment Costs: $.35-.65/GGE
- State and Local Taxes: $.20 /GGE (Texas Comptroller 2015) 4
Subtotal of costs: $1.30 - $1.60
All Costs except taxes based on 2013 average costs reported by NGV Day 5
"American Gas Association Playbook 2015." American Gas Association Playbook 2015. American Gas Association, 2015. Web. 9 Apr. 2015.
Feldmann, Robert. "Pennsylvania Utility Commission NGV Workshop – An Industry Overview." Pennsylvania Utility Commission. PUC, 18 Apr. 2013. Web. 1 Mar. 2015. <http://www.puc.state.pa.us/Electric/pdf/AFV/AFV_Workshop_PP-DNGI041813.pdf>.
Rayburn, Patric. "3 Reasons Natural Gas Fuel Prices Are Inexpensive and Predictable - Clean Energy Fuels." Clean Energy Fuels. Clean Energy Fuels, 7 Oct. 2014. Web. 20 Apr. 2015. <https://www.cleanenergyfuels.com/blog/3-reasons-natural-gas-fuel-prices-are-inexpensive-and-predictable/>.
"Texas Comptroller of Public Accounts, Glenn Hegar." Texas Taxes and Tax Rates. Texas Comptroller of Public Accounts, 2015. Web. 10 May 2015. <http://www.window.state.tx.us/taxinfo/taxrates.html>.
"CNG Cost Components." NGV Day. Dayton NGV Day, 28 Mar. 2013. Web. 11 May 2015. <http://www.ngvday.com/resources/9-CNG-Cost-Components.pdf>.