Oil prices have halved in the last six months, and the media are filled with stories of the benefits this is bringing the U.S. economy. Yet when looked at closely, the U.S. economy is only marginally a winner from this move. The real winner, because it produces little of its oil, is Europe.

As income investors, mostly overweight in the U.S. and underweight in Europe, we should adjust our portfolios accordingly. 

As we have heard trumpeted for several years, the U.S. is becoming increasingly self-sufficient in oil, on the back of surging production through fracking, oil sands and deep offshore fields. An oil price collapse causes two situations: one good and one bad.

First, there is some increase in purchasing power for the economy as a whole. However, more money in the pockets of consumers is somewhat offset by less money in the pockets of oil companies and their employees and stockholders.

Second, there can be a capital loss. Much of the new production is coming from methods such as fracking that have an extraction cost of $60 to $80 per barrel, and are owned by new companies without many reserves—cash reserves, not oil reserves. If oil stays around $45 per barrel, or even drops further, those guys are history. It will take a few months, but eventually they will run out of bank credit lines and will go bankrupt. That means damage to the financial and energy sectors and loss of jobs. 

So the oil price collapse is great for consumers, but neutral for the U.S. economy in the long run. However, its effect on Europe is almost wholly beneficial. The EU produces only 12% of the oil it consumes (big oil producer Norway isn’t a member.)

So the income effect on the EU of the oil price decline is almost wholly positive and there’s no great capital whammy to come from energy sector bankruptcies. (Even Britain, with a big oil sector, is today less than 50% self-sufficient and its North Sea assets are pretty old and fully paid for.)

The EU has suffered a prolonged recession since 2008, with almost no economic growth, but that may be about to change. Of course, other factors holding the region back, such as bloated governments and corruption, will still exist, but the macroeconomic boost from cheap oil will make even those easier to deal with.

Global Income Edge has recently increased its European holdings, and U.S. income investors in general should do the same. Most investors are underweighted in Europe, because the continent has looked unattractive for the last decade compared to the faster growth opportunities at home and in emerging markets. Still, for income investors there are a number of nice European dividend companies, which can be expected to benefit substantially from the better living standards that cheap oil has brought to the region.

Banco Santander (NYSE:SAN), for example gives excellent EU exposure, headquartered in Spain, with big operations in Britain and substantial consumer banking operations in Germany, Poland and other EU countries as well as Latin America. The Group is now attractively priced, trading below book value, following its recent share issue, which boosted its capital ratios to enable it to meet future EU stress tests and reduce its risk in a downturn. The only downside is that it cut its dividend to 20 euro cents a share, giving it a yield of about 3.7%. Still, it is ideally situated to benefit from an EU upturn.

Diageo PLC (NYSE: DEO) is based in Britain, though its drinks business operates worldwide. Western Europe is its second biggest market after North America, with 21% of its sales, but that’s slightly misleading as Eastern Europe is lumped in with Turkey and Africa to provide another 23% of sales. In both Western and Eastern Europe, as well as in most of its worldwide operations, Diageo should benefit from the new consumer ebullience; its 4.3% yield and global spread make it especially attractive for income investors.

Finally, Orange (Nasdaq: ORAN), the former France Telecom provides fixed and mobile communication services, with about half its revenues from France and substantial operations in Spain, Poland, and Africa. Trading on about 12 times prospective 2015 earnings, the stock yields 3%.

With these three stocks, as well as the rest of the GIE portfolio, you can get substantial exposure to the EU’s renewed growth, ensuring that your portfolio benefits fully from the fall in oil prices.