Natural Gas Vehicles Gain Senate Backing, Price Excepted to Increase

The Senate is reportedly backing a bill that will give encourage more natural gas vehicles, but could raise the price of natural gas.

T. Boone Pickens, the billionaire oil investor, has long supported the plan, but expects the bill to cause the price of natural gas to double. He estimated that prices would rise to about $7 per thousand cubic feet, compared with prices that would translate into about $3.46 per thousand cubic feet in recent trading.

Pickens has been promoting the plan for over a year, along with Chesapeake Energy Corp. (NYSE: CHK) Chief Executive Aubrey McClendon. The bill got some momentum in Congress when it became backed by Rahm Emanuel, the former Illinois lawmaker in the House of Representatives who now serves as chief of staff to U.S. President Barack Obama. Senate Majority Leader Harry Reid later supported the plan.

The Potential Gas Committee announced that the U.S. has 2,074 trillion cubic feet of natural gas still in the ground, which is nearly a century's worth of production at current rates. This number is up 35% from the previous estimate in 2007.

People are weary of the price doubling, but Pickens believes that despite the higher cost, it is still cost effective. Pickens estimated that the cost of refueling a natural-gas vehicle would still be cheaper than using conventional gasoline, as a thousand cubic feet of gas contains the same amount of energy as eight gallons of gas, which would cost between $20 and $24 at current prices.

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