Diesel or compressed natural gas? A real options evaluation of the U.S. natural gas boom on fuel choice for trucking fleets

Hui Xian, Berna Karali, Gregory Colson and Michael E. Wetzstein

Energy, 2015, vol. 90, issue P2, 1342-1348

Abstract: Prior to the current U.S. shale gas boom, compressed natural gas played only a minor role as a vehicle fleet fuel despite government policies supporting adoption. With new hydraulic-fracturing methods resulting in a natural gas supply surge, a structural shift has occurred in compressed natural gas price dynamics and its relation with diesel prices. This study analyzes the impact of this shift on the optimal fuel choice by return-to-base trucking fleets considering pre- and post-boom compressed natural gas and diesel price dynamics in a real options analysis framework. Optimal decision thresholds for differing size and vehicle miles traveled indicate that even in the absence of supportive government policies, compressed natural gas is a viable and profitable alternative to diesel under the new market conditions.

Keywords: Compressed natural gas; Diesel; Real options analysis; Trucking fleet (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Conversion of Shipping Fleets from Diesel to Compressed Natural Gas: A Real Options Analysis (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:90:y:2015:i:p2:p:1342-1348

DOI: 10.1016/j.energy.2015.06.080

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