The U.S. Natural Gas Superhighway

Energy has become a pressing issue lately, what with Middle East unrest and the domestic shale boom. And it's the latter that has particularly drawn attention.

In just a short amount of time, domestic petroleum production has spiked – particularly natural gas. The drilling process called fracking is still highly debated across the country, but it is responsible for the glut.

Natural gas prices fell to ten-year lows earlier this year. There is such an abundance of the resource that companies are actually flaring the gas on site due to a lack of sufficient transportation infrastructure.

So as the presidential race heats up, so does this question of domestic energy – what we don't have, what we do, and what to do with it.

The fact is, this abundant natural gas needs to be put to good use. It already has in some ways, replacing heating oil so that between 2005 and 2012, heating oil consumption has dropped from 900,000 barrels per day to 400,000.

But this is not enough. It's still clearly being wasted if it's being flared at such high rates. (And the rates are, in fact, high. In the Bakken in July, a third of the gas produced was flared on site.)

There's also the option of using natural gas as transportation fuel. It's cheaper than diesel and gasoline and could save drivers thousands over the life of the car.

Your average 30 mpg sedan, according to Ecobrowser, would cost roughly $5,500 more to run on natural gas. But the driver would save nearly $7,600 by using natural gas over gasoline.

But there's a problem: vehicles and infrastructure alike are scarce. Currently, the only natural gas vehicle available for consumers is the Honda Civic Natural Gas. In May, there were 1,047 CNG fueling stations across the U.S. – only half of which were commercial and most of which were located in California.

MIT Professor Christopher Knittel performed a study on the issue. He said:

Large-scale adoption of natural gas vehicles requires coordination between vehicle manufacturers, consumers, and refueling stations – either existing gasoline stations or replacements. This creates a chicken-and-egg problem, or a network externality issue. Consumers are unwilling to purchase natural gas vehicles before a refueling infrastructure is built, but businesses will not invest in natural gas refueling stations until there is consumer demand...Left alone, network externalities continue the dominance of the status quo technology when, from society's perspective, it should be replaced with a new technology.

But there is an opening in this circle, and that's with heavy-duty trucks.

In 2010, 0.4% of the U.S.'s heavy-duty trucks used natural gas. More are starting to pick it up, but the infrastructure is a problem for them, too.

But it shouldn't be for long.

Clean Energy Fuels Corp. (NASDAQ: CLNE) is building a Natural Gas Highway, connecting the biggest trucking corridors with 150 LNG fueling stations by the end of 2013.

And Waste Management Inc. (NYSE: WM) is purchasing natural gas trucks for 80% of its fleet over the next five years.

America wants to see this happen. Of course, consumers need it to be economically feasible. But natural gas extraction is at a high, and the next step is to put it to good use.

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