Oil's Rise Is Fueling the Wind Plays

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Every day that oil goes up, there is a new set of technologies that had formerly been priced out of the market that comes back to life. Let's take wind. Wind, in itself, just seems so stupid. It needs, well, wind. Much of our country doesn't have enough wind to make this economic. There are only certain regions that can really benefit.

But when oil is at $130, SO WHAT! The parts of the country that have a lot of wind are nuts not to do wind. Wind, when properly integrated into the grid, costs 4 cents a kilowatt. The issue has been shortage of everything that goes into a windmill, because nobody in the chain thought it was worthwhile to mass-produce them. So even though the cost is low, no companies felt it was worth it because the market seemed so niche.

In other words, it was the wind supply chain that was the problem, because we only thought in terms of gigantic plants that created energy. But with nuclear not an option -- never will be in this country, if you ask me -- natural gas falling out of favor post-Katrina as being unreliable, and coal simply intolerable because of the climate problems, wind has become the most natural fuel of all.

But think about all of the things that had to go right before the investment: The technology had to be refined to be sure that the blades were big enough to matter, the turbines and steel towers had to be mass-manufactured, the transmission into the grid had to be refined, and the companies that got into it had to be sure that oil was high enough to sink the cost into the manufacturing of turbines.

All of this had to happen. Anything goes at $130 a barrel. Suddenly little companies like Broadwind (BWEN Quote) are worth twice what they were when oil was lower.

Of course that kind of move is not sustainable. But what it does speak to is that we are now in the marginal incremental moment where one energy alternative after another kicks in and makes sense.

Suddenly side businesses in wind for Thomas & Betts (TNB Quote) and Owens Corning (OC Quote) and Trinity (TRN Quote) are making more money than their real businesses, which then allows more money to be brought in to further reduce the costs of turbines, which then takes them from being peak-load alternatives to base-load alternatives.

Things that didn't make sense now make sense. And stocks you wouldn't touch are now reasonable investments.

This process is leaving a lot of people behind. They can't figure how natural gas stocks got this high, but that's totally a function of the old 6-to-1 rule. Natural gas almost always trades as a ratio of 6-to-1 -- divide oil by 6 bucks -- so how can you not own Apache (APA Quote), Southwestern (SWN Quote), XTO (XTO Quote), Devon (DVN Quote), Ultra Pete (UPL Quote), El Paso (EP Quote), Anadarko (APC Quote) and so many other little companies.

Same with wind.

Each new dollar in the price of crude is theoretically some amount per share for a wind company. That's why they are so worth focusing on.

Notice I didn't mention solar, in part because solar is not -- other than First Solar (FSLR Quote) -- part of the grid equation. You need to either be attached to the grid to become useful or attached directly to a car engine to become useful.

Everything else is a little too one-off for investment and too boutique, so they'll need subsidies to see them through; no government other than Germany will provide those subsidies.

So, every dollar up, wind rides higher.

It's just that simple.

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