When to add CNG to the retail fuels product line?

When to add CNG to the retail fuels product line?

• Dec 07, 2012
• John Keller
• 2

If you’re not already offering compressed natural gas (CNG) as a retail fuels alternative, next year may be the year to start planning for a future retail fuels product offering that includes CNG. Consider the following set of data points:

1. The US now has approximately 1100 CNG fueling stations serving roughly 150,000 CNG vehicles.
2. Bloomberg announced in October that Chrysler will make the Dodge Ram 2500 CNG truck available for retail customers. Chrysler sees strong dealer demand for the CNG truck, especially in states like California, Oklahoma, Louisiana, Texas, Ohio, and Pennsylvania, where there is a well-developed fueling infrastructure. Fiat has 90% of the CNG and propane fuel market in Italy. Chrysler CEO Sergio Marchionne is an outspoken advocate of CNG as a viable alternative fuel.
3. Pennsylvania currently has 11 public CNG filling stations including three in the Pittsburgh area alone. The grocery chain Giant Eagle operates one of these locations.
4. It is now possible to drive across the entire state of Oklahoma exclusively on CNG, thanks to a tripling of the number of CNG stations there. The private retailer OnCue chain, operating c-stores in Oklahoma and Kansas, announced in November they have now sold 3 million gallon equivalents of CNG. The c-store chain now operates 13 CNG stations across Oklahoma. OnCue estimates CNG customers saved over $6 million in fuels costs by using CNG over traditional gasoline. OnCue plans to open another 8-12 CNG fueling stations in 2013.
5. The Honda Civic Natural Gas model is now being offered to 200 dealers in 37 states. That’s up from 71 dealers in five states just two years ago. In California, Honda is offering a $3000 debit card with this CNG sedan to help offset the additional $5650 in cost. California has 108 CNG filling stations in 83 cities. CNG is consistently priced at roughly half the equivalent for a gallon of gasoline in California.
6. After announcing their partnership last March, GE and Chesapeake Energy unveiled their “CNG in a Box” retail solution at the annual National Association of Convenience Stores tradeshow in October. Besides the benefits of offering CNG customers 40% lower fuel costs and 24% lower emissions compared to traditional fuels, GE suggests the CNG in a Box solution allows c-stores to increase their margins at the pump, even to the point of higher margins at the pump then in the store. These systems range in cost from $700,000 to $1.2 million.

Without question, fuel analysts need to keep a close watch on their markets to gauge the growing CNG opportunities. This alternative fuel may be a critical new way to help with retail fuel margins, and to help maintain fuel volumes, as part of the overall fuel price management strategy.