“ I wonder if you have come across ETFs that may have emerged, to benefit from the shale gas development! If not, do you think there are any existing ETFs that fit the bill? ”
Eoin Treacy's view Thank you for this question which arises from time to time. The issue with the boom in unconventional gas production is the downward pressure it has put on prices and the margins of producers. As the cost of production has risen but the price of the commodity has fallen, a number of shale gas companies have come under quite severe pressure. From the perspective of an investor seeking to profit from this secular trend, the key has been to focus on industries that are most likely to benefit from lower energy prices.
As volumes increase the product needs to be transported to the end consumer. Regardless of prices this is a material fact. Therefore pipeline companies have been among some of the best performers in the energy sector over the last few years. Quite a number are master limited partnerships which tend to pay high dividends and receive favourable tax treatment from the US government. (Also see Comment of the Day on December 4th)
The chemical, nitrogen fertiliser, industrial, utility and other sectors all stand to benefit from lower energy input prices.