What Obama’s Energy Plan Means For Commodities Investors

After years of environmental acts dying in Congress, President Obama is taking action by finally outlining a green plan for the U.S. Calling a press event at Georgetown University earlier this week, Obama discussed his goals: reducing carbon pollution, promoting green energy, and cooperating with  both developed and emerging economies to ensure global involvement. Many on the Hill have already objected to Obama’s goals and his use of executive orders to avoid Congressional approval, saying that the American worker will lose in this plan [for more commodity news and analysis subscribe to our free newsletter].

A New Start for Clean Energy

While Obama is adamant that we need to make an effort to protect our environment for future generations, he outlined very few specific changes that will need to be made; even admitting that he was not sure which steps would need to be taken. One of the few specific goals mentioned in his speech is the addition of solar and wind farms on government lands to encourage alternative energy growth. This could be a huge boost for the alternative energy market, which has only recently started to ramp up again after the financial crisis crushed the industry.

Hitting Coal and Oil Hard

Green Mountain Wind FarmOn the other side of the coin, shifting the U.S. perspective away from traditional “dirty” resources will diminish returns for companies that have built empires on oil and coal. One of the first to speak out against the President’s plan, Mitch McConnell, the Senior Senator for Kentucky has called Obama’s new goals an “attack on coal,” a major industry in his state. The carbon cap in talks will directly affect coal plants, which are currently the worse offenders in this pollution category.

Oil is also going to feel the burn, with Obama threatening to kill the Keystone Pipeline project if it proves to negatively affect the environment. This proposed plan would bring oil from the Canadian tar sands as far south as the Gulf of Mexico, and stopping the project now would be a huge loss for the oil industry [also see The Uncertain Future For Coal].

Ways to Play the Plan

The President expects to have a formalized plan and timeline this time next year, but investors can jump ahead of the curve now to profit from Obama’s Executive orders:

  • ExxonMobil (XOM)This traditional energy corporation has made huge leaps in recent years to profit from the spike in available natural gas. As a much cleaner form of energy than oil or coal, natural gas is likely to benefit from Obama’s plans, bringing Exxon along with it [also see How Crude Oil Traders Manipulate The Market].
  • WilderHill Clean Energy Portfolio (PBW): This all-green ETF offers investors a broad view of the alternative energy market from First Solar to Tesla Motors, and is currently up over 25% since the start of 2013.
  • Consol Energy (CNX): As the largest producer of bituminous coal in the U.S., Consol Energy is not excited about Obama’s new energy plans, stating earlier this week that the President’s plan will stymie economic activity. CNX could be a strong option for investors looking to short the coal market before the next phase of Obama’s plan.

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Disclosure: No positions at time of writing.

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