Recent figures released by the International Energy Agency (IEA) show how much rides on the U.S. ability to keep oil production from North American shale deposits rising. And that’s worrisome.

While the figures didn’t suggest any immediate pressure on oil prices—good news for stocks over the near and intermediate term—they did indicate that the balance between supply and demand has tightened somewhat, as the agency revised upward their forecast of global demand for oil. Meanwhile, supplies have remained in check due to political upheaval in Libya, Nigeria, Iraq and Russia.

Stronger demand from a pickup in global economic growth, combined with supply constraints, makes it that much more essential that North American oil producers keep up their end of the oil bargain. So far they’ve been up to the task, but a few metrics bear close attention. Primarily, output per rig, while rising for gas, is nearly static for oil across all the North American shale formations. For shale oil production to continue to rise, so must productivity.

All this makes another organization’s recent massive downgrade of the amount of recoverable oil reserves in California’s Monterey shale formation more than merely an “Oops, what were they thinking” moment. The Energy Information Administration report out last week gives us cause for concern. Previously, the Monterey formation had been touted as the biggest oil shale deposit in the country, supposedly containing many times the reserves at both the Bakken and Eagle Ford formations. Originally the EIA had estimated it might contain up to 13.7 billion barrels of recoverable oil, but it has now revised that figure down an astounding 96 percent, to 600 million barrels—a mere month’s worth of U.S. crude consumption.

That’s a little like being told by a realtor that your house is worth $1 million but later learning that the most you can get is $50,000.

Okay. As politicians like to say, “Mistakes were made.” We just hope and pray that this is a one-off miscalculation, and that the other U.S. oil shale formations will live up to their billings. The scope of the downgrading, however, raises obvious concerns about the U.S. decision to make fracking the linchpin of our energy future. If you’ve read our other writings, you know that we’ve long been, and continue to be, skeptical about shale oil as a long-term answer to our energy needs. Rather, we see stubborn systemic problems with fracking—namely, its intensive use of energy and other resources, which accelerates as it becomes necessary to force production from less accessible parts of reservoirs—that will eventually limit its viability.

That’s why it’s so frustrating to see the U.S. seemingly bet its energy future on fracking. It’s more abdication of an energy policy than an actual energy policy. It’s shortsighted, and I think, doomed to fail. Worse, it lets us take our eyes off the real prize, which should instead be investing in renewable energies and building out an energy grid.

Meanwhile, though, fracking remains a reality. And as with every reality, our job as investment advisors is to best determine the surest ways for investors to benefit. It shouldn’t be surprising that our top choices in this area aren’t the oil producers, very few of which have shown any ability to produce unconventional oil at cash profits (i.e., after capital expenditures). Rather, we like the oil service companies, whom producers depend on to assess oil reservoirs and provide, operate, and maintain the equipment needed to get the oil out. Their role has grown increasingly central as the focus on getting oil from shale has made the extraction process ever more complex.

When you talk about oil service companies, one company always heads the list: giant Schlumberger (SLB), the leading oil services provider (both on land and offshore) for more than two generations. It holds dominant franchises in oilfield services and production, including reservoir characterization which is critical in developing new reserves and squeezing additional oil from existing wells. It’s also a leading provider as drill parts.

Another favorite benefiting from the shale boom is National Oilwell Varco (NOV), which among the service companies is the clear leader in unconventional oil. It’s also the largest producer of equipment for fracking (and for deepwater drilling too). At the moment, the shares are exceedingly cheap, sporting a P/E relative to projected growth—a metric we call PEG—well below that of the S&P 500. The company throws off a lot of free cash, and the added kicker is that it could easily attract a suitor; we’ve put it on our list of potential takeovers.