When the U.S. is less dependent on foreign oil, several metrics change. The trade deficit and the current account deficit both fall. The latter, which is measured as a percentage of GDP, is expected to be down to 1.2% by 2020, as compared with the current 3.6%. This decline means both that the U.S. dollar is stronger and the cost of goods more stable. Each of these developments keeps inflation in check and allows the Fed and the administration to continue down their current path.
Industry developments
While the path for the Fed may be somewhat protected as a result of fracking, the developments within the industry cover a broad range of outcomes. Chesapeake Energy Corporation (NYSE:CHK) is well positioned within the industry, but recently it had to announce an SEC investigation surrounding the behavior of its CEO, Aubrey McClendon. It hasn’t been clarified how much risk the company faces, but SEC investigations tend to be fairly negative harbingers for the stocks of those companies. Chesapeake Energy Corporation (NYSE:CHK) is a great company that I might avoid for the time being.
After watching the scramble for land left to the second-tier players, the oil majors such as Exxon Mobil Corporation (NYSE:XOM)are probably preparing for another round of acquisitions, according to Bernstein Research analyst Bob Brackett. While Chesapeake Energy Corporation (NYSE:CHK)is both too big and too sullied to be a likely takeover candidate, Brackett sees the midsized names as being primed for a takeover bid. Exxon Mobil Corporation (NYSE:XOM) remains the largest oil company in the world and will probably factor in any M&A activity.
Showing the greener side of what is considered a dirty business, Halliburton has developed a device called the SandCastle. These devices used in the fracking process run on solar power and are estimated to have already saved 950,000 gallons of diesel. Clean Energy Fuels, meanwhile, has started a major push for the use of LNG in trucks and locomotives. Its “America’s Natural Gas Highway” initiative is aimed at installing the equipment necessary to allow trucks to make a complete trans-American trek solely on LNG.
While each of these companies plays a different role in the fracking boom, they all stand to profit substantially. The reality that increasing supply is good for the U.S. economy, thus giving the Fed more room to maneuver, makes it likely that the Obama administration will back fracking and the companies it benefits. The developments in fracking mean getting on board should have lucrative potential.
The article Fracking All the Way to the Central Bank originally appeared on Fool.com.
Fool contributor Doug Ehrman has no position in any stocks mentioned. The Motley Fool recommends Clean Energy Fuels and Halliburton and has options on Chesapeake Energy.
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