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RealMoney Radio Mailbag: Drillers Ride Crude Rollercoaster

A listener learns how oil price fluctuations move drilling stocks.

Editor's note: The following are questions received from listeners of "RealMoney Radio." To send Cramer a question about topics from his radio show, click here. Listen to Cramer's latest radio show by clicking here.

Jim, why do the stocks of drilling companies move up and down with oil prices? They don't even sell the oil, they just run the rigs.-- Jose from Puerto Rico

James J. Cramer:

The higher the oil price, the more likely oil companies are to take on new drilling projects, whose profitability depends largely on oil prices.

So as oil prices go up, demand for oil rigs goes up, and in turn the drillers increase their prices. In the near term, momentum traders simply magnify this effect enormously and the stocks often bounce around like crazy.

Jim, do you like UBS (UBS) ?-- John from New York

James J. Cramer:

I like UBS quite a bit, actually. It's the largest money manager in the world, and it's big in highly profitable Swiss banking. At 11 times earnings I would think about buying UBS.

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