Jim Cramer, Who Once Considered Oil Stocks Uninvestable, Explains His New Perspective

On Wednesday, CNBC’s Jim Cramer defended his newfound optimism about investing in oil stocks, saying he had changed his mind after concluding that circumstances had changed.

“From a fund manager’s perspective, there’s no shame in flip-flopping. Call me crazy, but when the facts change, I change my mind. I want to make money said the “Mad Money” host, who in January 2020 said he was “done with fossil fuels” and suggested oil stocks were the new tobacco.

At the time, Cramer expressed a bleak view of shareholders’ ability to make money from fossil fuel stocks, as he believed climate change concerns were driving young investors away from such stocks.

Cramer said Wednesday he thought his mindset was justified.

“Was I wrong to call them univestables? I don’t think so. Before the bottom in 2020, this group spent years in the niche. Of course, that’s not the case anymore,” Cramer said, alluding to the fact that energy ended 2021 as the best performing sector in the S&P 500. Energy has also already risen around 16% so far in 2022.

Cramer said there have been two major shifts at oil and gas companies that have helped cohort stocks outperform their previously lackluster returns. The first is that there’s a “whole new attitude” toward carbon reduction efforts, Cramer said, pointing to Chevron’s $10 billion investment by 2028 and Net Zero commitment from Exxon Mobil recently announced by 2050.

From an investing perspective, however, Cramer said the most significant change has been that “majors and independents have moved away from this ‘drill baby drill’ mentality”.

“Rather than spending a fortune flooding the market with new supply every time oil prices rise, they have become much more cautious. … Their restraint has helped the entire industry catch its breath, and that’s a big reason…why crude is now at $86 a barrel,” he added, explaining that higher oil prices are making the company considerably more profitable.

“I’ve spent years telling you about all the issues in the oil industry — from an investment perspective — and then these companies have addressed each of the issues that interest me,” Cramer said.

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Felix J. Dixon