TheStreet.com's Jim Cramer says you have to be bullish on the commodity when we're using more of it than ever, it's running out and $100 a barrel doesn't even sound crazy anymore.Can you trust the International Energy Agency to be right about how oil demand will be blunted by high prices and how consumption will decline?
First, let's deal with demand. I haven't seen any slowing in demand in any of the indicators I use, in part because gasoline hasn't kept pace with the commodity. Cars, certainly, haven't made any strides in using less gasoline, and news right now out of Ford (NYSE: F) (Cramer's Take) is that there's really been no progress whatsoever.
How about heating demand? I have seen no switch whatsoever to another fuel because of the rise. Not one bit, or you would see a nat gas rally.
How about power plant demand? I am willing to think that some power plant manufacturers will debate switching, but building a new coal plant is something no one feels comfortable with without new standards. Nothing's happened along these lines, though.
Solar? Even with First Solar (NASDAQ: FSLR)'s (Cramer's Take) amazing scale-up, it can't produce much more energy. Wind power's maxed for now. Nuclear? Only NRG (NYSE: NRG) (Cramer's Take) is on track to build new plants, but those won't come online until 2013 at the earliest.
Nat gas? We know -- again, from the price increase -- that there is nothing to support a switch to that fuel, which is still disliked by power plant manufacturers because of Hurricane Katrina and how it made the fuel unreliable. The liquid natural gas (LNG) plants that need to be built are years away.
Now, understand that we are not the energy market. The world is. But the growth areas of the world -- China, India, Central Europe, Latin America -- are using much more energy, not less. Real conservation plans haven't been put in anywhere.
We have not had any big finds of oil to create more supply. We have had some natural gas finds, but the market doesn't seem to want it at all.
Ninety percent of the oil is now owned by the nationals and they have taken away many chances to drill. That means the supply issues are growing, not shrinking. The major oils are thinking that oil is going to come down so only in rare occasions do they think that oil is going to be north of $70. Most are mired in $50 projections and won't drill extra because of that. Capital budgets remain lower than expected.
There is a sense that the Saudis can flip a switch and start pumping much more oil. I call your attention to a speech made by Conoco (NYSE: COP)'s (Cramer's Take) Jim Mulva made last week where he says he doubts the Saudis can add even a few hundred thousand barrels per day. Further, I'd put in evidence the excellent series given to us by Chris Edmonds from the Middle East, which support this notion and further talk about dramatic drops in oil findings and oil reserves there.
In the meantime, the technologies to find more oil haven't been keeping pace with the price, nor has the building of more rigs kept pace as anyone who has been on any Transocean (NYSE: RIG) (Cramer's Take) call knows well -- or on any National Oilwell (NYSE: NOV) (Cramer's Take) call, for that matter.
Also, at this very moment we have no particular disruption of any magnitude in the world. What happens if we do? Uncertain world, uncertain times, Islamic nationalism still on the rise, the U.S. viewed as a place to crush with higher prices.
Now, let's deal with IEA. This organization has been wrong the whole way. We are suddenly supposed to believe that they get it? Now they are smart and before they were dumb?
I have a really hard time dealing with the bear case for oil. We are using more, we are running out and $100 doesn't even seem like an important level anymore. It's more likely that we'll go to $200 and reminisce about $100 oil than that we'll look back and reminisce about $100 oil when we are at $50.
It is why I say right here, right now, buy Apache (NYSE: APA) (Cramer's Take), Conoco, XTO (NYSE: XTO) (Cramer's Take), Transocean, Marathon (NYSE: MRO) (Cramer's Take) and even Chevron (NYSE: CVX) (Cramer's Take) and Exxon (NYSE: XOM) (Cramer's Take).
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long ConocoPhillips, Transocean and XTO Energy.RELATED LINKS
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Reader Comments (Page 1 of 1)
11-15-2007 @ 9:36AM
ed johnsonh said...
what about upl
11-15-2007 @ 11:35AM
michael schneider said...
Last week everyone was looking for $100 oil-- the train appears to have been derailed for now. Predictions of a warmer than normal winter hit both oil and utilities yesterday- it's not a bad bet either since we have had warmer than normal weather the past few years. we also have increased evidence of a slowing economy in the US at least. And oil prices are high with considerable speculation. For most investors this all means it is time to be sure you are not overextended as some of these can get hit pretty hard. The other side of the story is it could be a good buying opportunity as oil pulls back but I suspect it is more of a long term opportunity to average into but not time to aim for a quick gain unless we have an event or maybe the onset of a strong cold spell. Today's oil numbers were bearish so it is probably time to wait. Carl Icahn just did add to his stake in Anadarko Petroleum though and the nat gas numbers were in line so it might be okay to add in that area but the market is so choppy it is best to think long term. Trader comments on today's oil inventories are available free right now in the Oil Alerts section (light blue, left side) at http://www.Barrelomoney.com.
11-15-2007 @ 11:41AM
Wilbert said...
It’s getting late to jump on the oil bandwagon now, look to more progressive forms of energy.
11-15-2007 @ 5:56PM
James Wilson said...
Cramer has a point. I know this industry having worked 30 years as a manager and vice president of two majors and a public independent and as a major business college professor. Energy will continue to be more costly since supply cannot keep up with demand. Alternative forms need a big breakthrough in technology to make up any ground. As long as there are more people in the world and nations like China and India continue to grow economically, demand will increase. The industry "gave" oil away for a long time when it sold below $50/bbl. It has been a bargain until now and is just now priced accordingly with regard to its high cost of extraction. Read Matt Simmon's book, Twighlight in the Desert to see if you believe the Middle East is fibbing about their reserves being higher than they are. The world may not be running out of energy but could be running out of "cheap" energy. If the US Government would just have allowed the industry to produce the energy we already have in the huge restricted areas of the country (Rocky Mt. states, Alaska, offshore east and west coast, eastern Gulf of Mexico), we would not be having this conversation. There is really only one deterent to high oil prices and that is high oil prices themselves. If too high, then changing habbits will dampen demand. I would not bet the farm on the oil stocks but they are a good bet into the future. I am increasing my position in them. If you want to learn more about oil and gas, go to http://www.ediseminars.com for public and private classes about the nuts and bolts of how this industry works.
11-15-2007 @ 11:15PM
mc said...
I sincerely believe oil stocks will be falling and falling over the next month! Oil Producing Countries cannot afford reaching the $100 a barrel, because it will threaten decresing demand and potential legislations in congress to save energy.. I would wait on buying until late december.
11-16-2007 @ 10:30AM
robert aldredge said...
keep your eye on kodiak energy kdkn ready to drill on 200,000 acres in canada under lease, indian lands, selling under 4,00 i give it a ten .
11-16-2007 @ 1:05PM
susan Baese said...
It seems like everyone on the site has great knowledge regarding investing. I don't!! I put much of my retirement in perferred stocks, many bank ( UBS, BAC, JPM, KEYCOR, RBS) as advised by my broker with UBS. I am receiving a 6.2 %dividend. I have sat here watching the money invested become less and less. When things were good, I asked to sell the Perferred, but was talked out of it by my broker. Now, when I phone, he says everything you have is related to interest rates. I haven't seen any rate changes, yet my perferreds continue to fall. My question, will they ever come back, or what will happen to me. I am down so much now, I can not afford to sell.... This is my retirement, will I be alright. Answers from someone else would sure be appreciated, as I am really concerned and confused............ Thanks!!!! Susan Baese
11-16-2007 @ 4:15PM
John Lysek said...
Historically, oil will hit a low in Feb or March...then it will make a run at $120 for the summer. Remember, Bush loves the Saudi's and his cronies back in Texas...and he truly loves those Wars!
11-19-2007 @ 3:53AM
ii2000426 said...
Dear Jim Cramer:
I emailed you and explained to you why FSLR has no future, due to extremely limited tellurium supply. I hope you drop that bomb shell on your show. Please read the latest Seeking Alpha article:
http://www.seekingalpha.com/article/54614-dark-future-ahead-for-first-solar