A 21st Century Transportation Stock
Every few decades or so, industries begin to swap one technology for another. While it doesn't happen overnight, by the time the shift is over, obscure companies have become industry kingpins.
Years ago, when diesel fuel was a lot cheaper than gasoline, major trucking companies and the manufacturers that supply them with vehicles began converting their long-range trucks to operate on diesel.
This was a major shift, but over time diesel powered engines became the dominant platform for companies like Caterpillar (CAT), Cummins (CMI), and Peterbilt Motors. This change eventually went beyond the trucking industry to include locomotives, buses, garbage trucks, and more. Taken together, these large transportation vehicles burn millions of gallons of diesel fuel every year.
But over time, the price spread between diesel fuel and gasoline narrowed to the point where in many areas, diesel is actually more expensive than regular gasoline. So the transportation industry has been looking for new alternatives to cut costs.
Increasingly they have been focusing on natural gas, for the obvious reason that the spread between its cost and the price of diesel fuel is now at a historically wide margin. Plus, with the recent findings of huge reserves of natural gas throughout North America, it’s likely to stay that way. In addition to the price advantage, natural gas is more environmentally friendly, burning 30% cleaner than diesel, and as a result produces fewer particulate pollutants.
According to the Natural Gas Vehicles Organization, there are currently only about 120,000 natural gas vehicles on US roads, but there are more than 14 million worldwide. Part of the reason that there are so few natural gas vehicles in North America is that there have been limited fueling stations available—only about 1,000 to this point.
Major transportation companies have been waiting for that network to expand, which it is predicted to do at a rapid rate over the next few years. This network idea was validated by an announcement last month that Shell would be building LNG (liquefied natural gas) corridors along major freeways which will make it feasible for long-range truckers to fuel up easily from coast to coast.
If you think there might be some investment opportunities that will take advantage of this migration from diesel to natural gas, you would be right. One of these is a Canadian company located in Vancouver, and it's called Westport Innovations (WPRT).
Westport was founded by one of the faculty members of the University of British Columbia's mechanical engineering department, Philip Hill, and was incorporated in 1994.
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