Fracking-300x255I am going to a “lunchtime dialogue” on fracking at the Aspen Institute today. Sadly, it is at this foundation’s offices in Washington DC, not in Aspen. I have written about fracking many times and the headlines are beginning to catch up with the math.

What is that math?

  • The U.S. will pass Saudi Arabia as the world’s largest oil producer within a decade, according to the International Energy Agency.
  • The U.S. will be energy independent within a decade or less, according to moi and, since I don’t count that much, according to Cathy Woods at Alliance Bernstein, a much more impressive individual.
  • Spot natural gas prices are still bouncing within shouting distance of $4 MCF; wellhead prices are lower. This is the equivalent of less than two bucks for a gallon of gasoline, delivered, considerably less than that at the wellhead.
  • Natural gas is killing coal-fired power plants — check out the data and charts at the Energy Information Administration — and the pace of conversion to natural gas is quickening.
  • Estimates of the supply of fracked oil and gas range from 75 years to forever.

The implications for the U.S. economy and for the markets — not to mention U.S. foreign policy — are enormous and extraordinarily bullish. Why? The ongoing availability of fracked oil and gas at low prices and means U.S. industry will have the lowest energy costs among all developed nations. According to Dow Chemical, more than 100 major “core” industrial projects are in the planning and/or permitting phase — refineries, smelters, petrochemical plants and so on. These in turn will support hundreds of new factories that will have access to more proximate and lower-cost industrial products. And so on down the manufacturing food chain.

Opportunities for investors

OK, that is in the future – the near future, but the future nonetheless. What looks good right now? Oblique or overlooked plays on fracking – specifically on the certainty of supply and getting that supply to users. I like U.S. Steel (X) here and now. More and more of its revenues come from the specialty steel used in hydrocarbon production and pipelines. Oh, did I mention pipeline construction will be up 82% in 2013?

Too many people are afraid of the worldwide slowdown and the impact on steel production and pricing and are ignoring the impact of the explosion in hydrocarbon production and transport in the U.S.

Think about it.




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