One recommendation is to invest in energy-related corporations whose stock price is highly correlated to the price of crude oil. This method of inflation protection is for those of us who do not have large sums of money to dump into real estate or gold, do not have time to study commodities, or become a landlord.
H.R. 2454 American Clean Energy and Security Act threatens the United States $14.4 trillion economy, measured by GDP, which is the largest national economy of the world. Of this amount, 7.5 percent ($1 trillion) of the US economy is attributed to by the oil and natural gas industry. To give you an idea of how the United States derives it source of energy, the below outlines the division of the energy industry:
- 40% from petroleum
- 23% from coal
- 23% from natural gas
- 7.4% from nuclear power
- 6.6% from renewable energy
Affect on Employment
The oil and natural gas industry alone represents 63% of US energy production and supplies the US economy with over nine million jobs to Americans. However, according to the Brookings study, H.R. 2454 would cause a 15% decline in refining employment and a 35% drop in crude oil employment1. Buttressing Brookings Study, the National Black Chamber of Commerce found that a net 2.5 million jobs will be lost after accounting for the new green jobs being created.
Affect on Individual Finances
According to the Heritage foundation, the Waxman-Markey (H.R. 2454) would cost the economy $161 billion in 2020; which equates to about $1,900 for a family of four. As the emissions limits decrease, the costs rises to $6,800 per family by 2035. In today’s terms, according to the Congressional Budget Office, the net present value of the bill would equate to approximately $12,000. Another way of stating the above statistics to more practical terms; the Congressional Budget office states that H.R. 2454 would add up to 77 cents per gallon of gasoline, while the Heritage Foundation has a more conservative analysis of gasoline prices rising by more then 74% by 2035.
Affect on Houston
It is easy to get lost in the numbers and difficult to make sense of it all when the data is not at a local level nor easy to understand. You need to fully understand how the Bill will affect you as a Houstonian. You must also keep in mind that 50% of Houston’s economic profile is derived from oil and natural gas. The below outline will help you see the national statistical breakdown and how it affects Houston directly:
· Oil and natural gas contributed over $1 trillion value added to US Gross Domestic Product in 2008.
· 25% of United States oil and natural gas production comes from Texas more than any other state with 27 petroleum refineries and 4.8 million barrels of production5.
· The Houston-Galveston-Baytown metropolitan area represents 13 of those refineries, roughly half of Texas’ production at 2.4 million barrels and home of the largest refinery in United States.
Simplifying the above data, Houston and surrounding areas represent approximately 13% of all oil and natural gas production which equates to $130 billion contributed to US Gross Domestic Product in 2007. Houston has a “gross domestic product” of $325 billion in 20074; therefore, if you extrapolate uniformly you can say that almost half of Houston’s income comes from oil and natural gas. Furthermore based on the estimated national job loss given by the National Black Chamber of Commerce3 and co-extending the data based on percentage of production, the Houston area will lose close to 325,000 jobs, which would cause the current unemployment rate to rise by 13%, from 8%2 to an unbelievable 21%.
The data is endless and I am capitulating to only one aspect of the bill. To truly capture the extent of this piece of work, please peruse over to Kate Sheppard’s outline of H.R. 2454.
An investor has two choices in how he manages his portfolio, he may either contribute his dollars to an investment allocation and watch how his account either floats up with the tide or down as the tide pulls back. Option two is to pursue actions that will contribute to the welfare of his portfolio and move his dollars to a different security or taking his money out of the market all together. In the era of Obamanomics, active portfolio strategy calls for activism and a true need to actively participate whether it be to spread the word of the travesty of H.R. 2454 American Clean Energy and Security Act or by calling your local congressman, senator or running for office yourself. You as an investor hold the power of how you spend your dollars and how you choose your vote. Let it be known, let it be heard and let it be felt…if not, the alternative is one out of every four people will be without a job, real estate values will all but collapse and the United States of America as we know it will cease to exist as we will soon have to import twice as much oil as we do today.
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