Fuel efficiency is no longer just a selling point for new cars; it's a federal mandate. Last week, President Obama set new standards that will double the fuel efficiency of cars and light-duty trucks by 2025, a move that was at once embraced and admonished by voices in the energy and automotive industries. "Adapt or die" has never been truer, and some companies will flourish while others fail. Prepare your portfolio: This ride is about to get bumpy.
In a continuation of the administration's mandated 35.5 mpg fuel efficiency by 2016, the new bar has been set even higher: Increase fuel economy to 54.5 mpg for cars and light-duty trucks by 2025. In the press release, the Obama administration highlights some of the expected environmental and political benefits of this initiative:
- Economic: save consumers $1.7 trillion at the pump ($8,000 per vehicle lifetime).
- Environmental: cut carbon emissions by 50% (6 billion metric tons).
- Political: reduce U.S. dependence on OPEC oil by 50% (2 million barrels per day).
The deal was penned by the U.S. government, but 13 automakers also signed on in support of the initiative.
Big Oil goes bust
When all the dust settles, the biggest losers might be oil companies themselves. Automakers can improve their fuel efficiency and incorporate new energy sources into their engines, but oil will remain oily, no matter what. Companies such as Occidental Petroleum Corporation
Natural gas offers increased fuel efficiency and ostensibly fewer carbon emissions, meaning that companies such as Chesapeake Energy
As the largest natural gas filling-station operator, Clean Energy Fuel
Plug in to profits
Electric-car company Tesla Motors
Foolish bottom line
The official White House release isn't lighting a fire it can't put out. To support its new standard, the government is introducing a variety of incentives, including benefits for electric and natural gas vehicles.
But beware, ye of natural gas faith: As both a nod and a warning to natural gas, the administration is in the market for technologies achieving "real-world greenhouse gas emissions." Although the new initiative supports natural gas, it also acknowledges the gas' fuel-efficiency shortcomings and might not settle for this fuel's fumes forever.
The energy sector is changing drastically, and this newest standard will speed along the inevitable switch away from oil and toward more efficient and environmentally friendly alternative fuel sources. The past 10 years have seen massive upheavals in companies' profits and perils, so be sure to stay one step ahead and adjust your portfolio accordingly.
As the roadside source for natural gas, Clean Energy Fuel stands to be the face of natural gas for consumers across the country. With 250 million vehicles on American roads, this company could potentially increase its customer base by as much as 10,000% in the years to come. For all the details on this stock, Motley Fool Analyst Jason Moser has prepared a special premium report outlining the threats and opportunities awaiting Clean Energy Fuels as it seeks to expand. It's available for a limited time only and comes with a full year of free updates, so pick up your copy today.