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Cramer: Collapse in coal happening faster than we thought

Cramer's nat gas play

This year will be the first time that natural gas is set to surpass coal in the U.S. as a main power source. Jim Cramer knew coal would be dethroned, but he was shocked by how fast it happened.

"I just didn't believe that our largely coal-based utility system could suddenly stop being largely coal based … sure, we figured natural gas would gradually surpass coal over time, we just didn't see it happening so soon," the "Mad Money " host said.

It seems that Cramer wasn't the only one shocked by the velocity of coal's popularity, either. As a result, he thinks it will have major implications on the stock market as many investors may have not anticipated the decline.

In 2015, 33 percent of U.S. power generation was from coal, while 33 percent came from natural gas, 20 percent from nuclear power, 6 percent from hydroelectric and 7 percent was sourced from renewable energy.

I no longer say glut because no material moves up that much if it is glutted.
Jim Cramer
George Frey | Bloomberg | Getty Images

However, just two years ago, coal accounted for 39 percent of U.S. power, with the expectation that it would reach parity with natural gas in 2020.

Even as coal has been hit hard by the downturn, the one thing Cramer didn't see coming was the rise in price for natural gas. It suddenly rose above the $2 price it has been stuck at for years and is hovering around $2.50.

"That is a gigantic move for a commodity where we know for a fact we have a lot more of the stuff than we can handle. I no longer say glut because no material moves up that much if it is glutted," Cramer said.

At first, many dismissed the natural gas rally because of heat waves and floods in Texas. Now that the price still hasn't come down, Cramer thinks the story is deeply linked to the collapsed of goal.

Cramer pointed to Cabot Oil & Gas, Range Resources, Chesapeake Energy, Southwestern Energy, Encana, Devon and Anadarko as the stocks that could benefit the most from the big move in natural gas. Though, Chesapeake and Southwestern have ugly balance sheets.

"I think your best bet is to wait for the next meaningful pullback in the price of oil in the expectation that these natural gas stocks will come down with the big oils, even though they don't deserve to. When that happens, you will have your chance," Cramer said.

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