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Cramer’s Natural Gas Winners

Natural gas could be the fuel the US economy needs, Cramer said Friday, both literally and figuratively. The mass adoption of this cleaner, more abundant commodity – than crude oil, that is – would create jobs, ease cost pressures on consumers and fight climate change.

“Mr. President, beat that,” Cramer said, calling out the White House for its lack of action so far.

Cramer has been touting the advantages of nat gas for a while now, and for good reason. The fuel emits 30% fewer carbon-dioxide emissions than oil and 40% less than coal. And the US is sitting on a potential 2 quadrillion cubic feet or more, which would eliminate our dependence on Middle Eastern crude. The US, its citizens and the companies that deal in natural gas could benefit immensely if the commodity got its due.

Hundreds of thousands, if not millions, of jobs could be created, Cramer said, if we built out our natural-gas infrastructure and switched to nat-gas-fueled vehicles. Kinder Morgan Energy Partners CEO Richard Kinder told Mad Money that 1,679-mile Rockies Express Pipeline alone employed about 15,000 people. The build-out Cramer’s calling for could multiply that number by 10, 20, maybe even 50.

Increased drilling pays off, too. The royalty payments generated by Pennsylvania’s Marcellus Shale should translate into 24,000 new jobs over the next three years, Cramer said. And that’s separate from those created by drilling. If the state exploited all of its gas reserves, unemployment there would continue to decline.

The biggest job creator, though, would be the switch to nat-gas-fueled vehicles. Clean Energy Fuels builds and operates natural-gas fueling stations, and CEO Andrew Littlefair said that a fleet of 250,000 18-wheelers powered by liquefied natural gas would create millions of new positions – 1.7 million, to be exact: 31,000 to build the required fueling stations; 93,000 to make tanks, pumps, hoses, nozzles and other related items; 104,000 to build LNG gas plants; 315,000 to make components; 220,000 to make the trucks; and another 960,000 jobs indirectly related to getting the trucks on the road and operational.

There’s also a way for investors to get in on the action. A number of companies are seeing bigger profits because natural gas is so cheap right now. Chemical companies, refineries, metals producers, agriculture firms and glass and composite makers all use nat gas in some way or another, and lower prices widen their margins.

PPG Industries may be Cramer’s favorite chemical company, but Dow Chemical gains the most from changing nat-gas prices. For every $1 change in natural gas price per British thermal units, Dow’s earnings per share change 31 cents to 40 cents. The company’s expected to earn 27 cents in 2009 but $1.07 in 2010, so cheap natural gas is “huge,” Cramer said, for Dow Chemical.

Believe it or not, 99% of glassmakers’ fuel costs come from natural gas. Cramer likes Owens Illinois in this space because a $1 change in the cost of nat gas per million British thermal units equals a 10-cent per share change in earnings. That’s 3% of the $3.02 the company is expected to earn in 2009.

US Steel sees a 62-cent per share change in earnings for every $1 change in the price of 1 million British thermal units of natural gas. X is supposed to lose $11.14 a share this year, but make 89 cents a share in 2010, so even a small shift in costs could swing the company’s earnings higher.

Lastly, Owens Corning , maker of composites and building materials, earns an extra 24 cents a share if the price of natural gas drops $1. This, too, is huge, Cramer said, given that OC expects to earn 89 cents a share in 2009 – a 27% jump.

“A whole host of industries benefit from lower natural gas prices,” Cramer said, but Dow Chemical, PPG, US Steel, Owens Illinois and Owens Corning see the biggest change in their earnings.

Cramer’s charitable trust owns PPG Industries.

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