ETF Trends
ETF Trends

President Bush’s signing of an energy bill will have implications beyond our fuel consumption and oil-related exchange traded funds (ETFs).

The law calls for an increase in vehicle fuel efficiency standards, more use of biofuels, such as ethanol, and more energy-efficient homes and appliances, reports Steve Hargreaves at CNNMoney.com. Refineries will be required to replace 36 billion gallons of gasoline with biofuel by 2022, and no more than 15 billion of those gallons can come from corn-based ethanol because of concerns about food prices.

The fuel industry is the most obvious industry that will be affected by the bill, but a ripple effect will likely be seen elsewhere as the changes are implemented. Automakers have long said that raising fuel economy standards would be costly. Will the bill drive up car prices as they feared? There is no auto ETF at the moment. And what will it do to the cost of air travel?

The cost of appliances could rise, too. But as socially conscious consumers replace their old appliances with new energy-efficient ones, it could increase spending. Increasing the use of corn-based ethanol could drive up the price of the commodity.

Some of the ETFs that could be affected by the bill include:

  • PowerShares DB Agriculture (DBA), up 29.1% since January inception. Corn futures are 23.5% of the fund.
  • U.S. Oil Fund (USO), up 39.8% year to date
  • PowerShares Dynamic Oil and Gas Services (PXJ), up 33.7% year to date
  • PowerShares WilderHill Clean Energy (PBW), up 52.4% year to date
  • Energy Sector Select SPDR (XLE), up 30.5% year to date
  • Dow Jones Transportation Index Fund (IYT), up 0.5% year to date

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.