Oil price instability impacts everything from the price of food and airfare to everyday household items like crayons, deodorant, and dishwashing liquid. The recent run up has put a squeeze on consumers' wallets, motivating them to seek  alternatives.

The transportation sector is particularly vulnerable to rising crude oil prices, as it accounts for over 70 percent of U.S. oil demand. Driven by demand growth, supply disruptions, and political instability in North Africa and the Middle East, higher oil prices have bolstered prices at the pump. Retail gasoline is already more than 25 percent more expensive than it was at the start of 2011.

One alternative that has been gaining traction recently is natural gas vehicles (NGVs). NGVs come in two forms: compressed natural gas (CNG) and liquefied natural gas (LNG).

The Pros
NGVs present many advantages over gasoline-powered engines; one of the biggest is price. While crude oil and gasoline prices have been increasing, natural gas prices have remained relatively stable. Gasoline tends to sell for twice as much as natural gas at fueling stations. Furthermore, proven reserves of natural gas continue to increase, especially as more shale gas fields are identified. The U.S. currently sits atop more than 100 years of natural gas supply, likely enabling natural gas to maintain a highly competitive edge to gasoline for the foreseeable future.

Another major advantage of natural gas is that it is a domestic fuel, lowering exposure to geopolitical events. In 2009, 80 percent of the natural gas consumed in the U.S. was produced here. Meanwhile, only 38 percent of the crude oil consumed in the U.S. was produced here. The list of our largest crude oil sources includes countries like Saudi Arabia, Venezuela, Russia, Libya and Iraq –whose recent events have posed risks to the U.S.

Finally, natural gas is a clean alternative to gasoline. While carbon dioxide (CO2) emissions are reduced by 20 to 30 percent with NGVs, carbon monoxide (CO), nitrogen oxide (NOx), and particle matter emissions are each reduced by as much as 90 percent. In a culture where environmental responsibility is a growing priority for consumers and policymakers, the potential to reduce emissions of greenhouse gases and hazardous pollutants is a real benefit of NGVs.

The Cons
Despite all these benefits, NGVs have some drawbacks. The largest obstacle today is the lack of infrastructure. There are currently about 1,000 NGV fueling stations in the U.S., half of which are not open to the public. This situation has created a classic "chicken and egg" dilemma: consumers are unwilling to purchase NGVs until they have more refueling locations, and companies are unwilling to build new fueling stations until they see more demand from consumers.

Another challenge is the price premium of NGVs. For production vehicles, purchasing the natural gas fueled model requires the consumer to spend, on average, from an extra $10,000 for passenger vehicles to $100,000 for heavy-duty trucks. In other words, it would take someone who drives 20,000 miles a year in a NGV that gets 200 miles per tank a little more than four years to recover the cost of the conversion.

Moving Forward
Incentives on the federal, state and local levels have emerged with vigor to bring NGVs to the market. The House of Representatives recently passed the "New Alternative Transportation to Give Americans Solutions" (NAT GAS) Act, which offers tax credits to promote the increased use of NGVs. Similarly, programs like the Clean School Bus Program, National Clean Diesel Campaign and the Clean Cities Recovery Act have been introduced to make it easier for cities, schools and individual companies to get the ball rolling on expanding infrastructure and putting more NGVs on the road.

The U.S. currently accounts for about 110,000 of the world's 12 million NGVs. A group of announcements suggests that number is on the rise. United Parcel Service (UPS) recently decided to add 48 LNG-fueled trucks to its U.S. Southwest routes, but only after securing $4 million in federal stimulus money. The move was soon followed by the establishment of a public-private partnership between the Department of Energy and five charter members (AT&T, FedEx, PepsiCo, UPS and Verizon) to bring into service 20,000 advanced technology vehicles and reduce petroleum consumption by seven million gallons per year. Encana, a natural gas exploration and production company, has announced plans to use LNG to fuel 200 supply trucks. And Ryder, a national truck leasing company, has announced it will incorporate 202 heavy-duty CNG and LNG trucks into its rental fleet.

Municipal services are also contributing to the growth of natural gas in the transportation sector. Waste collection trucks account for 12 percent of vehicular natural gas demand and represent one of the fastest NGV growth segments. Groundbreaking projects include one in California, where Waste Management is fueling its refuse trucks with natural gas collected from its landfills. City buses are another source of growth. The American Public Transit Association reports that 18 percent of transit buses are fueled by natural gas, and 26 percent of new orders for city buses were for NGVs. Airports are jumping into the ring as well. New York City, Philadelphia, New Orleans, and Houston are all home to airports that will use natural gas to fuel their buses and trucks.

CenterPoint Energy is working to develop and promote the use of NGVs. Current projects include the construction of a CNG fueling station in Shreveport, La., which will supply Shreveport's new CNG-fueled transit buses. In Arkansas, the CenterPoint Energy utility has begun replacing its fleet of over 200 company cars and service trucks with NGVs.

As long as crude oil is the dominant fuel for the transportation sector, volatile oil prices will cause consumers and businesses to closely monitor their spending and consumption habits. While there is no single solution to wean the U.S. off of its dependence on petroleum, NGVs, at least for the foreseeable future, appear to be part of the answer.

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