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Discovery Paves the Way to an Oil Peak

Jim Cramer

An oil discovery worth noting -- hallelujah! From the beginning of this historic run in oil, I have said that you will not get a peak until we discover more oil and oil companies can flood the market with oil that's in safe, nonpolitical areas.

Like the Gulf of Mexico.

And we finally got some, this Gulf discovery by Chevron(CVX Quote), Devon(DVN Quote) and Statoil(STO Quote), deep under the waters covering the Jack field.

What's important about this find -- beside the fact that I have been buying Devon aggressively for Action Alerts PLUS! -- is that I believe this will be the first of many finds that would have seemed uneconomic three or four years ago. Some oil companies, notably the two main ones involved here, Chevron and Devon, have been big believers that oil is going higher. Devon's been saying that for a half-dozen years. Chevron bought Unocal, a sign that it surely believes things are going higher. Both companies were thrilled to be drilling in a place that was long known to have oil, but oil that was considered too expensive to drill for.

No longer.

I suspect this discovery will be the first of many we will now hear about from the companies that are willing to spend. (Exxon(XOM Quote) isn't. It isn't clear that Royal Dutch Shell(RDSA Quote) or BP(BP Quote) even know what they are doing.)

It's not an easy time to wait for news of big finds. For the longest time, the national oil companies didn't want oil so high that we would pursue alternatives to oil. That's changed now. Iran and Venezuela seem to want so much to see the West hobbled that they're ignoring the long-term view. And the Saudis are running out of oil.

The sense from most of the dreamers out there is that alternative energy is the ticket. The sense from the hardliners is that dirty coal is the answer.

The real answer, at least for the next decade, is that we need to find more oil.

That's why this Devon-Chevron find matters so much. It's what we will be hearing about much more in the future, and more of these finds will keep oil from going to $100, where it would be headed otherwise.