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Conversion of Shipping Fleets from Diesel to Compressed Natural Gas: A Real Options Analysis

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  • Xian, Hui
  • Colson, Gregory J.
  • Karali, Berna
  • Wetzstein, Michael
Abstract
This study incorporates Real Options to determine the conditions under which it would be profitable for a regional shipping company to consider CNG (Compressed Natural Gas) as opposed to conventional diesel for the heavy-duty truck fleets. Such analysis can avoid the shipping industry adopting alternative energies, which are feasible under net present value (NPV) but infeasible in terms of market conditions. Ultimately, given fuel price patterns, our model could indicate an optimal selection of fuels, which provides some guidelines for a regional heavy-duty truck fleet company to make fuel selections and policy implications for government incentives about alternative fuels.

Suggested Citation

  • Xian, Hui & Colson, Gregory J. & Karali, Berna & Wetzstein, Michael, 2014. "Conversion of Shipping Fleets from Diesel to Compressed Natural Gas: A Real Options Analysis," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170285, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea14:170285
    DOI: 10.22004/ag.econ.170285
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    References listed on IDEAS

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    Cited by:

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    2. Markéta Mikolajková-Alifov & Frank Pettersson & Margareta Björklund-Sänkiaho & Henrik Saxén, 2019. "A Model of Optimal Gas Supply to a Set of Distributed Consumers," Energies, MDPI, vol. 12(3), pages 1-27, January.
    3. Josifovic, Aleksandar & Roberts, Jennifer J. & Corney, Jonathan & Davies, Bruce & Shipton, Zoe K., 2016. "Reducing the environmental impact of hydraulic fracturing through design optimisation of positive displacement pumps," Energy, Elsevier, vol. 115(P1), pages 1216-1233.
    4. Chen, Siyuan & Zhang, Qi & Wang, Ge & Zhu, Lijing & Li, Yan, 2018. "Investment strategy for underground gas storage facilities based on real option model considering gas market reform in China," Energy Economics, Elsevier, vol. 70(C), pages 132-142.
    5. Girma T. Chala & Abd Rashid Abd Aziz & Ftwi Y. Hagos, 2018. "Natural Gas Engine Technologies: Challenges and Energy Sustainability Issue," Energies, MDPI, vol. 11(11), pages 1-44, October.

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    More about this item

    Keywords

    Demand and Price Analysis; Resource /Energy Economics and Policy; Risk and Uncertainty;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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