While there are many reasons, we believe, to switch to “alt” fuel of all kinds, H.R. 1380 now pending in the House of Representatives would create a massive incentive for the “alt” industry if not our economy in ways that have yet to be publicly dissected. We assume that much of this discussion will come up in hearings, but we thought we would take the first stab at some of the economics behind the bill.
While in theory, just the rebates and incentives sound large, we thought we would put this into an actual bottom line analysis that will, we think, show how significant this bill really is not to mention the bottom line benefit for the middle class. We are not always a fan of tax breaks and subsidies, and right now think, of all times in American history, it is a patriotic duty to sign up for a revised tax code if not a more equitable system of “taxation.” H.R.1380 does that in a very interesting way. Remember that government subsidies of the oil business do not flow to consumer’s pockets, but to date have created a situation where they drain them. In a period of massive global speculation on petroleum, even price subsidies cannot adequately protect the consumer. Therefore, these subsidies, we would argue are a waste of money. Right now, the petroleum industry gets a whopping annual $4 Billion federal subsidy.
The one thing we don’t see in this bill is regulation and any sort of environmental analysis. There is a cost to the environment for natural gas extraction that also affects us all as well as the continued reliance on a fossil fuel. While CNG is dramatically lower in carbon pollution than petroleum, it is not an entirely carbon free source of fuel. We hope that these are the kinds of debates that come up during hearings. We for one want to see the country begin to address the mistakes of the past (specifically what we think are far too loose regulations if not financial support of the petroleum oil business). That said, this is our standard take on any kind of energy business. As we have noted here before and probably will do so again, even wind and solar farms have serious environmental impacts if not correctly installed, or as California (in particular) are installed in environmentally fragile areas (starting with deserts).
We will, no doubt discuss all of these issues in future blogs, but as a company that also has a focus on health and managing disabilities, we can never walk away from the fact that our energy has a price and that policy must address that.
This said, H.R. 1380 poses significant possibilities for creating a “space” for government (for one) to do that. Starting with finding ways to both cut the budget and strengthen consumer protection.
In this vein, we thought we would include a few facts and figures here to demonstrate what a potential boost this bill will give to the average business or even consumer (and not just at the pump).
H.R.1380 gives large incentives both for the fuel and for conversions (not to mention brand new car sales). While we of course intend to buy new cars (the MV-1 comes with a factory installed option to go CNG) we also know that not everyone is in our position. The idea of buying a whole new fleet to replace an existing one asap just to convert to CNG is probably not an option for most, not to mention the average consumer just running out and buying a new vehicle in the current state of the economy. And that’s where the conversion numbers start to make a lot of sense.
But where, do many ask, do you get the money to convert these vehicles? The typical conversion of a NGV (natural gas powered vehicle) runs between $12,000-$20,000. At the high end, in fact, as much as buying a new car. However when dissected and put into another context, this giveback is extremely significant when you figure in the added savings on fuel.
For simplicity’s sake, we have taken the average fuel cost of a taxi, which uses about 5,000 gallons of fuel a year. In a world of $4.00/gallon petroleum and approximately $1.50/gallon for CNG (also taking into consideration the $0.50 at the pump federal tax incentive for CNG fuel included in the bill) and the numbers not only add up, they begin to create imperatives rather than just “incentives.”
For example, in this world, the average cost to a taxi operator per year for petroleum in this model is now about $20,000. Per vehicle. Yup. Pretty shocking, right? The same taxi driven on CNG would only cost $7,500 per year to fuel.
This creates an immediate, year 1 incentive to convert. If the average cost of conversion runs $12,000-$20,000 per car (minus the bill’s proposed floor of $7,500 per conversion) this means that potentially a converted vehicle driver could see cost savings even in the first year. Even at the high end for conversion, a driver in this scenario could save up to $1,000 their FIRST YEAR after conversion. Every year thereafter, they would save an extra $13,500.
Our one thought here is that the government should probably also create some kind of financing option, allowing the cash-strapped to convert (for one) or some other way to insure that people have the opportunity to take advantage of “tax breaks” even if they can’t front the dinero. This is a very, very important part of the equation and insures that those this bill could help the most get a chance to benefit. Particularly now.
We also note that this provision will create another impact on the economy – the increase in “clean” conversion shops and green mechanics. Those are jobs that will impact every community who takes the CNG plunge.
We welcome the day, and applaud these provisions. For a cash-strapped America right now, this is the kind of tax break we can support. It will also pay government back in dividends. Every single government fleet, from cars to buses to trash trucks, costs the consumer the same kind of premium.
Taking the “gas” out of government is just as important as draining it from the private sector. If nothing else, it will reduce the cost of government itself in some rather dramatic ways.
We don’t think there will be many on Capital Hill who can argue with that equation, even if passage of the bill will do absolutely nothing to “convert” other kinds of “gas” which always seems to float out across the country from Washington D.C.
Freedom Riders 