The burgeoning U.S. shale industry that has helped reduce natural gas prices to record low-levels now may benefit U.S. commuters and the transportation sector. Oxford Catalysts Group Plc and Sundrop Fuels Inc., backed by Chesapeake Energy Corp., are planning to build factories in the U.S. to make more affordable diesel, gasoline and jet fuel from cheap gas. This gas-to-liquids technology has proven successful at locations like Royal Dutch Shell’s Pearl GTL plant in Qatar, where gas feedstock prices are also relatively low.

According to Bloomberg, with access to gas at $3.89 per mmBtu, Oxford Catalysts would be able to produce premium diesel for $66 a barrel, or $1.57 a gallon, at a plant with a capacity of 1,500 barrels per day. In contrast, Oxford Catalysts estimated that producing premium diesel from oil would cost about $124 a barrel, or $2.95 a gallon.

Environmentalists, and proponents of alternative fuels, like Expert Marshall Kaplan, have proposed tactics to address the problem of how to “break open the decade-old transportation fuel market.” Are gas-to-liquids plants a solution?

Is natural gas a reliable and effective alternative fuel source to petroleum? What technical, economic and policy barriers stand in the way of producing fuel from gas?