The Fed-Oil Link Is Ridiculous

The Fed does not control the dollar. The dollar does not control oil. We do not control the price of oil in the United States, despite what you will hear at 10:30 today when the inventories come out.

But I hear disinformation about all of these topics every day. Yesterday the Journal said the link between oil and the dollar is so strong that you just have to look at the dollar to figure out where oil is going to go. Therefore, when the Fed didn't raise rates, that moved the dollar lower, which then drove oil higher. If the Fed had tightened, the thinking goes, and the dollar went up, which it is "supposed to do" in these commentators' eyes -- not a sure thing at all where I am from -- then oil should have gone down.

If you believe this nonsense, then you think the Fed is in charge of the price of oil. Again, I read about this all day, and it is so at odds with what's happening with, say, coal and natural gas pricing, that I have to ask myself, "Where do they get this stuff?"

Now, here's the real skinny: The dollar is all about the budget deficit and the trade deficit. If you could cut the budget deficit, you will see the dollar rally big. There are always many stories about how a central bank has decided to defend a currency by raising rates even as the government prints money. We have seen this time and again. The oil futures are simply not controlled by us. We have had a miraculous decline in demand in this country, a decline of 863,000 barrels a day, 3.9% below last year. What has it done to pricing? NOTHING. Our decline is a drop in the bucket. If oil gets hit today off the build in inventories, which I believe it will, don't panic. Wait a little and then buy!

I also can't believe we keep hearing about how speculation may be at fault. I don't believe there is manipulation of the oil futures, but I do believe there is manipulation of the press on these things. It is just too inconceivable to me with the contacts I have in the oil and gas industry to think that the dollar plays almost any role at all. But people don't want to believe it. They want to believe that somehow the Fed can control things.

It can't.

And it isn't. Of course, there is another whole skein of thinking called the "intellectualization" of things. I see it all of the time in the business. People want to relate things and find correlations that don't exist. I can't blame them. When you have a pattern and can exploit it, that's huge. The real issue is when you shoehorn the data and make it conventional wisdom by blathering about it to the media all day. That's where we are now.

It's why most people have missed out on the oil rally, which is, once again, about everyone -- including the Saudis -- running out of oil.

They will run out in dollars. But they will also run out euros, yuan, reals and any other currency you may have in your pocket. So get ready for the decline in the futures tomorrow, courtesy of big inventory builds and the weak dollar, and start buying the oil and gas stocks as I said in my first piece yesterday.

Random musings: Bank of America (BAC - commentary - Cramer's Take) is simply going to be crushed by all of these state attorneys general who are gunning for Countrywide (CFC - commentary - Cramer's Take). ... I am keying on steel today, as that group is a key leader in this market, and we don't want to lose it for too long.

At the time of publication, Cramer had no positions in the stocks mentioned.

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