A new report from Oil Change International reveals that the Republican spending bill, the One Big Beautiful Bill Act, will grant $40 billion in new subsidies to the oil and gas industry over the next decade. This legislation adds to the nearly $40 billion in new federal subsidies for fossil fuels that the Trump administration has already implemented in 2025. With these new subsidies, the U.S. will now spend at least $34.8 billion annually on domestic fossil fuels, a significant increase from the preexisting $30.8 billion yearly subsidies.
The implications for the agriculture sector are multifaceted. On one hand, lower energy costs resulting from fossil fuel subsidies could benefit farmers and agribusinesses that rely heavily on energy for operations such as irrigation, machinery, and transportation. However, the environmental consequences of increased fossil fuel production and use could negatively impact agriculture. Climate change, exacerbated by fossil fuel emissions, can lead to more extreme weather events, altered growing seasons, and increased pest and disease pressures, all of which pose risks to agricultural productivity and food security.
For investors, the increased subsidies present both opportunities and risks. Fossil fuel companies stand to gain directly from the new subsidies, potentially boosting their profitability and share prices. However, investors should also consider the long-term risks associated with fossil fuel investments, including regulatory changes, market shifts towards renewable energy, and the potential for stranded assets as the world transitions to a low-carbon economy. Additionally, the environmental and social costs of fossil fuel production, which are not internalized by the industry, could lead to reputational risks and financial losses for investors.
The report highlights the challenges of phasing out fossil fuel subsidies, even with political will. President Joe Biden’s attempts to eliminate certain fossil fuel subsidies were thwarted during climate legislation negotiations with then-senator Joe Manchin. The resulting Inflation Reduction Act provided additional subsidies for fossil fuel-friendly technologies, such as carbon capture and storage. The new subsidies from the One Big Beautiful Bill Act further complicate efforts to transition away from fossil fuels.
The agriculture sector and investors should closely monitor these developments and consider the broader implications for their operations and portfolios. While short-term gains may be realized from lower energy costs and increased fossil fuel industry profits, the long-term environmental and economic risks cannot be ignored. Diversifying energy sources, investing in sustainable practices, and advocating for policies that promote a just transition to a low-carbon economy may help mitigate these risks and ensure long-term resilience.