Oil Headlines Brush Off a Stronger Greenback

We saw some damaging headlines in last week's Financial Times that put into perspective the crisis in oil and gas and how little it has to do with our demand and the Fed.

First: "Saudis put oil capacity rise on hold," and second, "Russia starts to pay the price for its energy strategy."

The Saudis have, historically, been anxious to keep oil prices down through additional production in order to keep us addicted. The Saudis know that if you send the price high enough, nations get determined to wean themselves off oil. The 1979 oil shock caused Brazil to switch to ethanol. I doubt we have the guts to chance policy, but other nations do.

What does the headline say? I think the Saudis don't have excess capacity right now. We think they do, but they haven't been able to drill enough and it has become so prohibitive to drill because of the more difficult places that are left, that the Saudis just aren't going to be able to keep oil prices down.

The second headline is even more damning: The nations with oil -- from Canada to Venezuela, from Russia to Mexico -- have made it so hard to drill without paying more to the state or allowing the state to have more money to drill that we aren't able to exploit the reserves we do have. The Russians in particular have been too fickle to drill.

If I were BP (BP - commentary - Cramer's Take) (BP - commentary - Cramer's Take), I would be reluctant to put more money in that country. The threat to the company's current investment is never-ending, and the trashing that Chevron (CVX - commentary - Cramer's Take) took at the hands of the Russians makes thing too unstable to put money in. Venezuela tells you that you can lose it all! Mexico needs to put more money into drilling and needs outside technology, but they aren't authorizing it. While Nabors (NBR - commentary - Cramer's Take) recently said natural gas has risen enough to put money into drilling in Canada, the tax scheme's pretty confiscatory.

These are true supply dilemmas that have nothing to do with the dollar or the U.S. They are worth remembering every time you see a decline in the price of oil. They are also why natural gas will work higher: It is plentiful and easily accessible in the lower 48.

That's why XTO (XTO - commentary - Cramer's Take), El Paso (EP - commentary - Cramer's Take), Devon (DVN - commentary - Cramer's Take), Apache (APA - commentary - Cramer's Take), Anadarko (APC - commentary - Cramer's Take), Southwestern (SWN - commentary - Cramer's Take), Ultra Petroleum (UPL - commentary - Cramer's Take), Questar (STR - commentary - Cramer's Take) and Chesapeake (CHK - commentary - Cramer's Take) continue to make sense even at these prices.

Random musings: Please get in touch with charities and spread the word that we welcome their lists of auction items that are being presented by actual auctioneers at their events nationwide. We want to help charities, and it is worth your time, as we can bring in nationwide bidders. ... It is hard for me to fathom the endless rallies in Visa (V - commentary - Cramer's Take) and MasterCard (MA - commentary - Cramer's Take), but remember a lot of it is that there's no supply and big mutual funds need financials -- these represent financials. Earnings are due for MA, the stock's moved up so much that someone will probably take profits no matter how great. ... We are getting no money into stocks and big money out of stocks. Rather counterintuitive given the low cash rates. Won't last forever. ... EMC (EMC - commentary - Cramer's Take) said last week, after a great quarter for VMware (VMW - commentary - Cramer's Take), that it has no plans to spin off VMW when the chance for such a spin takes place next year (they can do it now, but there is no tax-advantaged selling yet). Speaking of VMW, the winner of "Beat the Street" played EMC and VMW very well. You should participate in this contest. The chance to win $5,000 for filling it out with your portfolio seems to make a lot of sense to me. ...

At the time of publication, Cramer was long EMC, El Paso and XTO.

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