Why is the price of natural gas less volatile than diesel and gasoline?
Motorists and truckers know that the price of gasoline and diesel changes constantly. It can vary by several cents daily, which can be a little frustrating… especially when it’s on the rise! However, the price of natural gas has been very stable for several years and the financial markets agree that it will continue being stable for a few more years.
What is it that makes the price of gasoline and diesel vary so much from the price of natural gas? Find out in this article.
Reasons for fluctuating gasoline and diesel prices
First, it should be noted that gasoline and diesel are commodities that are operated and distributed internationally, while natural gas is a regional product. This means that there are a wider variety of economic, political and geographic factors that can affect the price of gasoline and diesel. Simply put, supply and demand around the world are the main factors that so often cause the prices of these fuels to fluctuate.
For example, currently, the coronavirus crisis has caused a sharp drop in the price of oil on international markets. Since people are confined to their homes and there is much less movement and travel permitted, the demand for oil has decreased significantly, driving down its price.
How is the price of natural gas calculated in Canada?
Across the country, there are different ways of calculating the price of natural gas. Natural gas can be sold per gigajoule (GJ), cubic metre or thousand cubic metres. The way the price is calculated can vary by province. For example, in Saskatchewan, natural gas is sold by volume, while in Alberta it is sold by energy content (GJ).
What about the price of compressed natural gas?
In Quebec, the price of compressed natural gas (CNG) is calculated by weight, unlike gasoline or diesel, which is priced per litre. The fuel is therefore charged by the kilogram.
Some advantages of CNG price stability
One of the main advantages of stable compressed natural gas prices is purely accounting. It becomes much easier for companies with a fleet of CNG vehicles to forecast their fuel expenses. This makes it easier to establish an accurate budget for these companies.
The fact that natural gas is a regional product means that there are fewer external factors that can affect its price. Even if demand were to increase in the coming years, its price would still be easier to anticipate than that of traditional fuels such as gasoline or diesel.
EBI, your compressed natural gas supplier in Quebec
In short, the price of natural gas is less volatile than gasoline and diesel prices, since the latter are international commodities and the natural gas market is not as large. As a result, there are fewer economic and political factors affecting the supply and demand for natural gas, which ensures some stability in its price. Now it’s up to you to take advantage of it!
At EBI, we currently have 5 public CNG fueling stations operating in Quebec. We offer flexibility in the method of payment by offering you to pay per fueling or at the end of each month upon receipt of a detailed consumption report. For more information, we invite you to contact us!