Thursday, December 27, 2007

President Bush Signed The Energy Bill: Now What?

President Bush signed off on a new energy bill, the Energy Independence and Security Act of 2007, last week. The bill is being touted as “groundbreaking” by some and a disaster by others. The main pieces of the bill include new fuel standards for cars and new renewable fuel production requirements. But what does it mean for investors?

The biggest piece of this bill, in terms of impact to investors, will be the renewable fuel portion. According to the Energy Independence and Security Act of 2007, the U.S. will be required to produce at least 36 billion gallons of renewable fuel by 2022--about five times what we are producing now. The New York Times recently pointed out some of the arguments being made by the bill’s critics. “Critics contend it will make cars and trucks less safe and more expensive, divert farmland to costly production of feedstock for ethanol and other synthetic fuels, and raise the price of food because of competition for corn and grain between fuel refiners and livestock growers," according to The New York Times.

Because more land, specifically farmland, is going to be needed to grow these materials, one can expect the price of farmland to rise along with the prices of goods grown on that land. Investors who wish to capitalize on farmland should read our article on farmland investment.

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