By Andrew Littlefair on

One look at historical prices for natural gas vehicle fuel compared to gasoline, diesel and propane and two pronounced trends are immediately apparent: natural gas fuel prices are consistently less-expensive and less volatile. Three main reasons drive these trends.

1. The overwhelming abundance of natural gas in North America.  According to EIA’s August 2014 Natural Gas Monthly report, August was the fourth consecutive month dry natural gas production in the U.S. set a record for the highest amount ever produced.  Natural gas abundance is forecasted to continue for many decades to come.

2. Nearly all (98%) of natural gas consumed in the U.S. is produced in North America.  This translates into a stable and secure energy supply.  Gasoline and diesel prices are at the whim of global oil prices set by many countries which, “don’t like us very much and are unstable,” as our co-founder T. Boone Pickens likes to say.  This means volatility and can make forecasting gasoline and diesel fuel prices challenging at best.  Propane on the other hand is a bi-product of natural gas processing and oil refining.  Propane prices follow oil price trends and propane prices can suddenly spike as-seen this past winter.  As a by-product, “…there is no ready source of incremental production when supplies run low”, according to and the National Propane Gas Association.  This complicated dynamic is reflected in higher-price and more volatile propane prices.

SEE ALSO: Realizing America’s Competitive Advantage with Natural Gas for Transportation

3. The natural gas commodity makes up much less of the price you pay at the pump for a gallon-equivalent of natural gas fuel, compared to gasoline or diesel.  This further insulates the retail price of natural gas fuel from fluctuations in natural gas commodity prices—though such fluctuations are a remote possibility due to the abundant and domestically-secure supply of natural gas discussed above.

By comparison, 66% and 61% of the pump-prices of gasoline and diesel, respectively, are made up of the commodity price of oil, according to  Because the majority of the pump-prices of these fuels are so heavily comprised of oil, fluctuations in global oil prices have a far greater effect on prices at the pump.


The graph below shows the commodity cost in a gallon-equivalent of natural gas, diesel and gasoline through 2040, based on EIA data.