While it's true it will take time for demand to shift from diesel to natural gas, two important facts need to be understood. First, the market is a forward-discounting mechanism and prices will tend to reflect what the market believes they should be in six to 12 months into the future.
Second, diesel shouldn't be expected to drop 3% if demand moves lower by 3%. There is not a linear relationship between the supply and demand curve. A 3% reduction in demand is likely to result in a 6%-10% drop in price.
While it's possible for natural gas and diesel to reach cost-per-mile parity, I would not expect it to happen anytime soon. Natural gas engines are currently more expensive and it's much harder to travel with the lack of refueling stations.
ChinaWhether using natural gas or diesel engines in automobiles, China has now become the largest auto market in the world and it may be hard to make an argument that China's energy consumption is going to take a significant downward turn anytime soon. China's growing energy demand growth should not be considered the same as European or American growth. Between domestic and foreign sources, China can be expected to maintain a healthy balance between needs and sources. China National Offshore, China National Petroleum and Sinopec do not have the same inconveniences securing energy as American and most European companies have. Take Iran, for example. While U.S. politicians are spending time trying to figure out ways to make Iran do what it says, China is
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