How to reduce US foreign oil dependency

Good stuff from Fitzsimmonds..

Fiat’s Nat. Gas Cars

While so many other auto companies embrace the expensive and unproven electric cars there is a lone voice of reason in the industry – Fiat’s Sergio Marchionne.

Marchionne, CEO of Fiat (FIATY.PK) and Chrysler Group LLC, is one car executive that realizes natural gas vehicles offer a better way to reduce foreign oil import and cut emissions. That’s because they are cheaper than electric cars and won’t rely on coal generated electricity. Besides their high price, Marchionne also believes electric cars will require too much battery recharge time.

Fiat believes natural gas transportation is very suitable for the U.S. Not only does America have abundant natural gas reserves, the country also has the most extensive natural gas pipeline in the world – a potent combination and the country’s #1 economic advantage. “Fiat’s technological leadership in compressed natural gas in Europe is a key asset for the U.S. natural gas vehicle market,” the CEO said this week.

Fiat commands 80% of the NGV auto market in Europe, and 55% of the light vehicle commercial market. Fiat sold 127,000 NGVs in Europe last year, including versions of the Panda “Natural Power” compact and Ducato van.

Here is a really cool French video that shows the Panda Natural Power being refueled at a natural gas refueling station:

Here is a YouTube video where you can see profiles of the Panda while listening to some cool jazz.

According to Alfredo Altavilla, chief of Fiat’s Iveco truck unit, natural gas is a “more affordable solution” as it’s less expensive to produce, transport, and distribute compared to other fuel sources. Altavilla said the additional cost for a natural gas engine is $3,000 compared to $3,300 for diesel and $8,000 for an electric hybrid.

Fiat and Chrysler will join the natural gas vehicles association in Washington and are currently studying whether to sell NGVs in America. Americans desperately need another NGV option – the Honda (HMC) Civic GX currently being the sole NGV available in the U.S. Regardless, Fiat is going to re-enter the U.S. market next year and has a sales goal of 50,000 units.

If only Marchionne could get a seat the the table in Washington as our leaders attempt to address the economic malaise gripping the country. One would think from watching the talking heads on CNBC the only key to fixing our problems is the Bush tax cuts. However, if it’s as simple as the Bush tax cuts – then why did the 8 years of Bush governing end so badly? Instead of ending in a glorious flash of economic prosperity, the Bush administration ended with a huge pile of debt and a legacy of government bailouts for banks, financial institution, and ‘Gov’t Motors’. The Obama administration is merely a continuation – the debt and deficits keep rising, the bailouts continued, and now we have the Federal Reserve embarking on the ill-conceived “QE2” program.

The problem is simple: the U.S. is reliant on foreign oil imports for 60% of its consumption. This is roughly the same percentage (60%) that imported oil is responsible for in our trade deficit. When will the leadership in Washington, the media, and the American people understand that we cannot solve a commodity problem (dependence on foreign oil) with fiscal and monetary policy?

I am sure Marchionne would agree with me that the key to reviving the United States as an economic and industrial leader is to reduce foreign oil imports. I am also quite sure Sergio would agree the most economic and environmentally sound way to do these is by adopting and embracing natural gas transportation on a large scale.

Back in the oil crisis of the 1970’s, my Dad was the first person in my city to purchase a Fiat sedan. If memory serves the car cost $1700 and got over 30 mpg. While the neighbors joked, we laughed all the way to the bank as they drove their tuna boat American vehicles to the gas station twice a week. The car was grey and we nicknamed it Topo Gigio after the mouse on the Ed Sullivan show. It helped our family make it through those times. Could it be that 30 years later Fiat comes back to the U.S. and helps us make it through the current (unpublished) oil crisis? I for one surely hope so.

Like Westport Innovations (WPRT) and Fuel Systems Solutions (FSYS), I believe Fiat’s stock could be a key strategic long-term holding. Despite the reluctance of U.S. policymakers to adopt natural gas transportation, the rest of the world is doing so now. Countries like Argentina, Iran, Pakistan, Brazil, Singapore, and Italy are not reducing foreign oil imports with electric cars (in fact, no country is doing so to any significant affect). These countries are using NGVs to reduce oil consumption. Some of them, so they can export their oil to the United States. Perhaps Fiat can help the U.S. turn the corner. Time will tell.

Meanwhile, the oil and gold market are again sending the message that Washington refuses to hear:

  • The U.S. must adopt a strategic long-term comprehensive energy policy in order to significantly reduce its over 60% reliance on foreign oil imports
  • The U.S. must adopt the only domestic fuel capable of being scaled up to do so: natural gas via natural gas transportation.

To not do so is simply delaying the inevitable and increasing the economic pain in the meantime. You see, at some point in the not too distant future, the United States will be forced to use its most abundant, clean, and cheap fuel. It is simply a matter of time. The companies listed above will thrive due to their overseas operations. When the U.S. finally gets a clue, these stocks will skyrocket because they will be sitting there with the technical solutions and with their production and distribution operations already in place.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.