This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Jim Cramer: The Truth About the Oil Revolution

Editor's Note: This article was originally published on Real Money on Dec. 13. To see Jim Cramer's latest commentary as it's published, sign up for a free trial of Real Money.

Where are the big petrochemical plants? Where are the fertilizer additions? Who is really taking advantage of the newfound cheapness of our energy?

Last night, I had Mark Papa on Mad Money. If you don't know Papa, he's the man who has discovered so much oil in the Eagle Ford and the Bakken shales that his company, EOG Resources (EOG), has actually moved the needle on cutting imports. Almost the entire change in oil production increases comes from these shales and a huge percentage of the increases are due to EOG.

We are supposed to have some sort of revolution on our hands because of all of this oil. We are supposed to be bringing down the price of oil and gas with it and making our continent energy independent. We are supposed to have some sort of industrial renaissance.

But what do we really have?

First, we have plans by two chemical companies to take advantage of what may be an incredible differential between our natural gas and "their" natural gas, which means everywhere but the oil rich Middle East.

That's not a lot of jobs.

Second, we are supposed to have some increase in fertilizer production because of the huge differential. But these companies are still not taking advantage of it and switching manufacturing here.

Third, we are expected to see a massive manufacturing shift from companies in expensive energy regimes to our own.

It's not really happening. The big job gains here come from the creation of a network to send our oil to refineries so we can export it and the creation of a transfer station to send our natural gas, in liquefied form, overseas.

There are no possibilities on the drawing board that I have seen to harness this bounty to bring lower fuel costs to consumers.

While I wholeheartedly agree that this revolution could happen, all of this is an abstraction until we use the natural gas component of our bounty as a surface fuel. A great thing is happening but isn't happening in a way that's meaningful to anyone, other than those companies that have found a lot of oil and those companies that can export refined product or use world prices to make a ton of money arbitraging the difference.

When the book is written on the revolution that is our technological change in drilling, the horizontal movement, we will marvel at two things: one, how much oil and gas was recoverable and, two, how little of it mattered to jobs, security and the American consumer.

What a terrible shame.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free

Markets

Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs