RPT-Cheap diesel deals big setback to natural gas truck sales

(Repeats item with no changes to text)
By Nichola Groom
Nov 5 (Reuters) - Sales of trucks powered by natural gas are
sputtering and growth will be far weaker this year than last as
tumbling diesel prices prevent drivers from switching over to
the cleaner-burning fuel even though it is cheaper than it has
been in years.
Sales of medium and heavy duty natural gas trucks are
expected to rise less than 1 percent this year after climbing
nearly 27 percent in 2014, Power Systems Research, a St. Paul,
Minnesota firm that studies engines, told Reuters. It cut that
projection from about 4 percent earlier this year.
Lured by lower fuel prices and the desire to please
increasingly emissions-conscious customers, the trucking
industry in recent years has been adopting natural gas as a fuel
source despite far higher costs for the trucks.
But now oil's more than 50 percent drop in the last 16
months is setting back the natural gas truck market by several
years.
"Adoption rates of natural gas engines will ultimately
depend on the price of diesel fuel," said Jim Downey, a vice
president at Power Systems Research, which now thinks it will
take until at least 2020 for 4 or 5 percent of U.S. trucks to
run on natural gas, not 2016 or 2017 as previously projected.
A few thousand natural gas vehicles are sold each year for
long haul trucking in the United States, compared with some 3.4
million class 8 trucks - the heaviest duty truck classification
- on the roads.
Though benchmark U.S. natural gas NGc1 has tumbled by more
than 20 percent since late September to around $2 per million
Btu on some days, the cost savings of using natural gas versus
diesel is narrower than it was a year ago.
That benefit has dwindled to about 15 cents a gallon, down
from 50 cents a gallon a year ago, said Raymond James analyst
Pavel Molchanov.
When potential buyers factor in the tens of thousands of
extra dollars for natural gas trucks, the switch doesn't make
sense as it used to for many.
"I don't know of anyone looking at it for monetary reasons
anymore," said Kurt Palmer, director of sales for the leasing
arm of Palmer Trucks, a Kenworth truck dealer with locations in
Indiana and Ohio. "It slowed almost to a crawl, and for a while
it was the hottest thing going."
Palmer Trucks has sold or leased about 70 natural gas trucks
this year, down from about 100 last year, Palmer said, adding
that most business this year was from existing customers
replacing older trucks, not people switching to natural gas.
Contract Transport Services LLC, a regional trucking company
in Green Bay, Wisconsin, has added 31 natural gas trucks to its
147-truck fleet since 2013 but is holding off on adding more.
"If diesel was at $3.85 a gallon I'd still be buying them,"
CTS President Curt Reitz said. Diesel is now around $2.30 a
gallon in the Midwest.
Westport Innovations Inc WPT.TO , a Vancouver-based
manufacturer of engines for natural gas vehicles, expects its
U.S. business to be about flat this year.
"The U.S. market is going to continue to be a slow rise,"
Chief Executive David Demers said.
Despite the gloomy outlook among buyers and manufacturers,
fuel supplier Clean Energy Fuels Corp CLNE.O said natural gas
pricing guaranteed in long-term contracts appeals to many.
Fleets "almost prefer stability over low prices so that they
can properly budget," spokesman Gary Foster said.
Dillon Transport Inc, based in Illinois, is still buying
natural gas trucks because its customers require lower-emission
vehicles. But the time it takes the company to recoup the
additional investment has doubled to 3 years.
"We are still drinking the Kool-Aid," said Phil Crofts,
Dillon's director of marketing.