Liquefied Natural Gas Could Displace Oil as Top Transportation Fuel

While 1.5 million barrels of oil may not seem like a large chunk of the 93.6 million barrels a day of global demand in 2015, according to the International Energy Agency, it only took about 1 million barrels a day in global oversupply in the third quarter of 2014 to contribute to the collapse in oil prices.

IHS said that environmental, technological and commercial factors are combining to make trucking and shipping fleets convert to natural gas as their transportation fuels, despite cheaper oil prices.

“The fall of oil prices has diminished much of the glow from what was an overly optimistic market opportunity for natural gas in transportation,” said Michael Stoppard, IHS Energy chief strategist for global gas, in the study. “Nonetheless, the shift to greater use of gas in trucks is set to continue. It is widely accepted that power generation is the primary growth market for natural gas demand, but gas as a fuel offers a new market with potentially more value.”

Truck fleets have relatively high turnover rates, so the expectation is that they will transition to LNG and compressed natural gas more quickly than cars. For instance, UPS is switching its trucks to LNG in Houston and elsewhere, while Waste Management is converting to CNG trucks.

The IHS study forecasts that gas demand in trucks will reach 81 billion cubic meters by 2030 and be split between LNG and CNG. Another 17 billion cubic meters in LNG demand is expected to come from ships by 2030 as well, IHS predicts.

“At a time of abundant LNG supply in search of insufficient markets, this extra demand could be critical for mitigating oversupply,” Rafael McDonald, the study’s project manager, said in the announcement. “Companies will need to adapt their business models to take advantage of the market opportunity.”