Pain From '80s Factors Into Oil Now

Maybe we won't see a change in the psychology of the oil industry until we see the retirement of the class of 1980. The people now running these companies tended to be the people who were in charge of finding oil back in the heyday, 1980-84. These were the people who paid huge amounts in government auctions for oil, who risked billions on shale and tar sands only to be chastened beyond belief by the collapse in oil later in the 1980s.

You have to recognize that the oil business is an insular one. You join it and you work your way up from the bottom, which is the people who prospect or plan to find oil, to the executive suite. These same people who gaffed so badly, who spent or threw away so much money on prospects that they had to write off literally billions and billions of dollars back when that was a lot of money are at the helm. They will not come around to the idea that we are in a whole new era; they don't believe these prices. They keep waiting for these prices to come down.

What I am saying is that unless we find more oil or conserve more oil -- neither of which this administration can do much about, nor can the Chinese or Indian administrations -- we are going to have higher prices. The current oil executives are wrong. Until they retire, you are looking at higher prices because they still haven't even upped their budgets much to find more crude.

That's the real issue behind the scenes. These execs have been burned so badly early in their careers that none of them can see the reality: The projects that they wrote off 20 years ago now are viable. These execs just don't want to revisit the pain.

Can't blame them. It's human nature.

Random musings: Starting to see some real selling now in the home and home-related stocks. Maybe the Fed is getting its view across!

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James J. 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. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS by clicking here. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to [e-mail]. Listen to Cramer's RealMoney Radio show on your computer; just click here. Watch Cramer on "Mad Money" at 6 p.m. EST weeknights on CNBC. Click here to preorder Cramer's latest book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict."

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