|Fracking stocks are just one of many ways to play the long-term boom in U.S. energy production.|
NEW YORK ( TheStreet) - President Obama, his critics in the oil and gas industry, and the environmental lobby are all working overtime this week to gain leverage in debate about the U.S. oil boom and high gasoline prices. It's often wise to turn away from politicians and special interests groups for a dose of sanity. Amid
all the hoopla over U.S. oil and the Keystone XL pipeline -- whether it will actually raise gas prices, whether it's a gift to Canadian oil companies and won't even benefit the U.S., and whether the president is selling out the environment and a clean energy future -- Citigroup has released a report stating an obvious fact. America is going to be a bigger and bigger player in the global energy supply equation, and that means there are stocks to buy and hold for the long-term to capitalize on this prominent energy production role. As Goldman Sachs came out this week with a "once in a generation" buy opportunity in equities, Citigroup is staking out a similar position about U.S. energy stocks specifically.
Citi dubbed the U.S. "The New Middle East" in a report from energy and industrials analysts and has highlighted 10 stocks it thinks portfolio managers should hold for the long-term to capitalize on the U.S. energy trend. The Citi report offers some hard numbers -- as well as heady economic assumptions -- to replace the rhetoric that has been ratcheted up as gas heads toward $5 in an election year.
The United States has become the fastest growing oil and gas producing country in the world, and is likely to remain so for the rest of this decade and into the 2020s. The cumulative impact of new production, reduced consumption, and associated activity may increase real gross domestic product by 2% to 3.3%, or $370 billion to $624 billion, with $274 billion coming directly from the output of new hydrocarbon production alone. The federal deficit, currently running at negative 3% of GDP, may be reduced by 2.4% of GDP, or 60%. The deficit shrinking and GDP gains may reverse the long-term historical decline of the U.S. dollar, helping it to appreciate by 1.6% to 5.4% and keep its status as the world's reserve currency. In the energy specific context, Citi is watching a number of industries that benefit from the increased supply of oil and natural gas. "Clearly, resource holders and oil field services companies will do the heavy lifting," Citi said in the report. "Other industries will also participate. In order to move these molecules to market, pipelines will need to be built. Processing plants will need to separate the diverse stream of oil and gas. Refineries will need to process increasing oil supply into gasoline and diesel. Gas is now a cheaper fuel for power generators compared to the last decade. The fertilizer industry which was driven out of the US in the last decade is now slowly returning. Chemical companies have a cheap feedstock for cracking. Environmental equipment will need to be manufactured to extract unconventional oil and gas in a responsible fashion."