EIN News says, "Chesapeake Creating $1 Billion Fund to Boost Natural Gas Use in Transportation Chesapeake Energy Corp. is creating a $1 billion venture capital fund to boost demand for natural gas as a transportation fuel. Chesapeake will start advancing its plan by investing more than $300 million in two companies, including one owned by T. Boone Pickens. (newsok.com)".
Excellent news! This is the kind of thing that made America great. Private capital investing in a big idea. It's now a corporation versus the old-time individual greats, such as Rockefeller on railroads, Carnegie on steel, Ford on automobiles, Bell on telephones, but at least, it's not government. We can only hope that government will not meddle with it and screw it up by imposing impediments or supplying grants.
It's a risky business. The basic question is whether natural gas can compete with gasoline as an automotive fuel.
Natural gas usage has been around for many years as fuel for fleet taxis. It has generally been cheaper than gasoline, but is much less convenient to use. Gasoline is a liquid and can be contained in a relatively inexpensive on-board gasoline tank. Natural gas can only be handled as a liquid at very low temperatures, which is not practical on automobiles. The standard procedure of using natural gas as an automotive fuel is to carry it in very heavy-walled tanks, usually in the trunk of the car. This has the disadvantage of decreasing storage space for other items and also substantially increases the weight of the vehicle, which then requires more fuel.
If natural gas is cheap enough, the weight requirement for more fuel use is less significant, and the size of the vehicle can be increased to accommodate the large heavy-walled tanks. The recent discovery of large quantities of natural gas in the Marcellus Shale of the Northeast may give a gas price which can compete with gasoline.
Some other factors are that gasoline is only obtained from crude oil through substantial investment in refineries. Present refineries are operating at about 85% capacity, which is pretty high for any industrialized process. There have been no new refineries in 29 years, because existing refineries had been continually upgraded for efficient operation. It is also predicted that no new refineries are in sight, because of a predicted oil shortage. The oil shortage prediction may not be realistic, because of advances in drilling techniques and the continuing discovery of new reserves. Limitations on oil production in the US have been self imposed by government. That also can change, as we replace the Administration and the Secretary of the Department of Interior, who controls drilling permits.
All told, it's a risk, which as it should be. The possibility of significant profit is there, as well as significant loss, depending upon how a number of factors work out. We will see whether there is still enough entrepreneurial spirit left, with capitalistic motivation to take on the risk. T. Boone Pickens is apparently one member of the conglomerate. He has a reputation for taking risks on big projects, which have generally been successful. Let's hope that this is not an exception.
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