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"Where are you most being taken advantage of? At the pump," Jim Cramer told his

"RealMoney" radio show listeners Tuesday.

Buying gas "has never been a particularly great experience," he said, but with prices north of $3, it feels like we have a problem on our hands.

But Cramer believes that consumers need to stop thinking that the process is corrupt. Getting oil from the ground to the pump is a difficult process that's becoming harder every year, he said.

You have to find it, and unless it is light, sweet crude, it's nearly impossible to drill for, he said.

Then it needs to be pumped, transported, refined and taken it to a distributor. Finally, it's transported to a gas station.

"Could there be more ways to get this wrong?" Cramer asked. Plus, oil is in hard-to-get-to places that make the process even more difficult.

He said that it's also important to note that refineries have been running nonstop ever since Hurricane Katrina took some out in the Gulf Coast region. But these things weren't meant to be run at these levels, Cramer said.

When refineries are running at more than 100% capacity, things will eventually break down, he said. Refineries will blow up and people will get hurt.

And let's not forget "geopolitical instability everywhere we look," Cramer added.

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All the oil producers are putting out oil that is used by the entire world. And things are so tight that if a single country can't produce, prices will go higher, Cramer said.

Cramer believes that present difficulties and the threat of unforeseen problems justify these high crude prices. "It's not about gouging."

We have to get used to these prices, and it's likely that they'll go even higher, he said.

But that doesn't mean that people should take these prices sitting down, he said. It's time to make some money from this.

Cramer said that



is the best refiner because it has the safety record and is the best run.

Plus, he said that the stock is cheaper than it has ever been, even though it is up 30% year to date, because its earnings growth has increased.

As long as gasoline prices stay up, he believes that this low-cost producer will make money "hand over fist."

It's on the way to $100, he said, adding that Valero is better than

Exxon Mobil


, but is valued at nearly half the price.

Cramer likes

Oregon Steel Mills


because it makes steel oil pipelines, and he likes

Lufkin Industries



Gardner Denver


because they are involved with pump work.

Cramer's Callers

A listener who owns




Chesapeake Energy


wanted to know if it would be wise to add

Nabors Industries


. Cramer owns Halliburton and Nabors for his charitable trust

Action Alerts PLUS.

Cramer said that if more than 20% of a portfolio is in a single sector, then it's too much.

"You can have too much of even the hottest groups," he said, asking listeners to remember the dot-com bust that took out investors who had all their money in tech.

If 20% of the portfolio is already in Halliburton and Chesapeake, then Cramer said he wouldn't add any more energy stocks.

He added that Nabors is more directly levered to the price of oil, while Chesapeake is a natural-gas driller. Because natural gas prices have been depressed, Cramer said he would rather own Nabors in this environment.

He told another caller that

Advanced Micro Devices


, 10 points down from its 52-week high, should be bought because it's the "bargain of the group."

Cramer also said that he would sell



right now at its low.

As for chip stocks under $10, he said that he likes



and that he was heartened by a Citigroup analyst who believes that the company will beat its earnings guidance.

Cramer likes



, which has pulled back 20%, because the company enables big telecom companies to send videos over phone lines.

Analysts believe that



will have a good quarter, and Cramer added that



is the best fiber-optic chip play.

However, Cramer said that



, which he also owns for his charitable trust, may be the strongest in the sector.

The P/E Ratio

Cramer often says that he uses price-to-earnings growth as a benchmark when evaluating whether a stock is expensive or cheap. A listener wanted to know whether Cramer uses company or Wall Street earnings estimates.

"This is the toughest lesson I'm going to teach," Cramer said; but he also believes that it is the most essential.

We can't care about the dollar amount of stock, he said. We should care about the dollar amount of what a company is going to earn.

Cramer started with the basics, explaining why it's important to evaluate stocks. For example,

Rite Aid


is at about $4, while



is at about $43.

But he said that Rite Aid is not cheaper. This is because the price of the stock is irrelevant, and that investors should focus on a company's growth rate, i.e., how much the company is growing its earnings per share.

Walgreen is growing its earnings-per-share price at roughly 15%, but Rite Aid is growing at only about 7%. Cramer said that investors should be willing to pay double the amount for Walgreen because it is growing twice as fast.

Plus, the stock price for both companies is equal to 33 times their forward-earnings estimates. Investors are paying too much for Rite Aid -- at 33 times earnings -- when they can pick up a company that is growing faster at the same price.

Cramer said that people doing their homework can get company's forward-earnings estimates from Web sites such as

Yahoo! Finance



At the time of publication, Cramer was long Halliburton, Nabors Industries and Qualcomm.

James J. Cramer is a director and co-founder of He contributes daily market commentary for's sites and serves as an adviser to the company's CEO. Outside contributing columnists for and, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for

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