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What are we to make of the actual impact of these new oil and gas deregulations, the ones Trump propounded yesterday?
It's very tough to tell. First, Trump can rant and rave about coal all he wants -- and he does -- but most of the CEOs in the utility business have had it with coal. They have their plans set for years about how many plants they are going to build and what kinds of plants -- and this news will not make them rip those up, especially any that include wind, solar, and most important, of course, natural gas.
It's pretty obvious why they won't scrap renewables, even as it remains a small part of every utility's fleet because of reliability issues.
Nat gas isn't as obvious, because there are many states with coal workers who would love to see the utilities build new coal plants.
But these CEOs know one thing: politics is fickle. If they start building coal plants now and Trump isn't reelected, they may have to shut down those same plants if a Democrat wins the White House, causing tremendous pain to the rate payers.
It just isn't worth it, particularly because we are now the world's largest producer of natural gas -- and the price is likely to stay low for years and years, because we keep finding more and have fewer places to put it even after we export it through burgeoning LNG terminals, like the one Cheniere opened last year and Dominion should open this year at Cove Point, Maryland.
Many of the coal plants that are still in use are being phased out, as they tend to have 40-year lives and they were built at the behest of Jimmy Carter when he was proudly hailing us as the "Saudi Arabia of coal." The execs don't want to spend any more money fixing up those plants. They would rather just build new natural gas plants and stay out of trouble. Remember, natural gas just passed coal as the biggest source of power for utilities this year. More than 30% of the fleet is coal, but that's been diminishing every year.
So utility coal's not going to be saved. Its demise, at best, will be slowed.
But one thing did catch my eye that is very bullish for all U.S. oil and natural gas companies: the possible loosening of methane rules. When you visit any oil drilling site, the execs are totally hung up on how the Feds were always trying to get them to stop producing methane as a byproduct of drilling. They particularly didn't like the flaring you so often see when you visit a site. That's often methane being burned, and the fear was the EPA would somehow limit the amount of methane that could be produced and that would cut down the amount of drilling that would be done.
The fact that's clearly not going to be the case, at least from the Feds, which is the agency that these oil and gas companies truly fear, is a boon to all of the domestic drillers, which is why you saw so many of them lead the indices yesterday -- not because oil had a tiny gain.
This news is huge, because if the companies no longer need to fear the EPA coming in and jumping all over them for flaring, they can probably accelerate all their drilling programs without being worried about catching the government's attention.
Of course if you are a huge believer in the hazards of methane, you have to be upset with this. But remember I am not trying to celebrate global warming, I am saying that the domestic independent oil and gas companies are the biggest winners of this deregulation -- not the coal companies, simply because you can't make people use coal but you sure can help the drillers drill more aggressively, which is exactly what they will now do.
I think this "good" news isn't yet in the marketplace -- even after yesterday's reversal. It won't be, unless you know how badly the execs fear the EPA and how much more aggressively they can approach drilling if they no longer fear methane restrictions. For them, now, it's damn the regulators, full speed ahead.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.