Australian investors should buy United States energy stocks, which are set to boom due to fracking technology cutting domestic power costs, according to Threadneedle Investments chief investment officer Mark Burgess.
"The US economy looks set to benefit from an industrial renaissance in the coming decade, driven by access to cheap domestic energy," Burgess said.
Shale energy's new technology, fracking, was enabling companies to economically extract oil and gas that was too expensive just a few years ago and so, unlike other developed countries, the US now had growing access to cheap oil and gas.
Burgess pointed to companies such as LyondellBasell and National Oilwell Varco as two businesses set to benefit from shale drilling in more than 30 US states.
"Australian investors needed to consider their exposure to growth from global markets/assets", he said.
In the US, investment was increasing in both the infrastructure needed to exploit and transport shale gas and in the industries where it was a major input. This included chemical plants and fertilisers as well as power utilities, where the use of shale gas was increasing.
"The US is embarking on a multi-year era of heavy investment in infrastructure, industry and power generation that will boost GDP and employment growth," Burgess said.
US crude output began rising in 2009 and was likely to surge in the coming years as the technology that fuelled the national shale-gas rush moved into the country's oilfields.
Rising domestic energy production and increasing energy efficiency meant the current decline in oil imports would continue. The US would depend less on foreign supplies of oil, a development that should boost both the trade account and the dollar.
Burgess said LyondellBasell, one of the world's largest independent chemical companies, was expanding US production of ethylene, an essential plastics ingredient.
Ethane, a component of natural gas, was a key input and "we expect the price of this feed stock to fall over the rest of the year, a development that will drive strong profits growth at LyondellBasell", he said.
National Oilwell Varco would also benefit from rising investment in shale oil. It had two businesses, one supplying mechanical components for land and offshore drilling rigs and another producing drill pipe.
The company was already announcing strong results, Burgess said. In February, it unveiled fourth quarter earnings growth of 30 per cent compared to the same period in 2010.
"There is a strong case for Australians to adopt a true world view when it comes to equity investing," Burgess said.
"The traditional approach of trying to capture growth only through emerging market equities won't give investors access to all the best opportunities available in markets globally."
