Jim Cramer's Best Blogs

Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:

• oil's decline,
• the bifurcated banks, and
• the SEC's dangerous ignorance.

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Oil's Fall: Econ 101

Originally published on Monday, Aug. 11, at 9:04 a.m. EDT

Nigerian rebels, Iranian saber-rattling, potential Israel-Iran war, hurricane warnings, Venezuelan meddling, Turkish pipelines, BP woes in Russia, all of these at one time have allegedly contributed to the strong oil price. Every time we rallied a couple of bucks, the usual suspects were rounded up and given credit for the rally.

And then the biggest actual ruckus of all -- a war between major oil producer Russia and Georgia -- rages on, and oil cascades lower into the escalation. LOWER! If this incursion were to rank with the parade of horribles that allegedly spurred oil from $90 to $148, it would be off the charts. It is the real deal that can interrupt pipelines and cause a calamity in the European market. It should have sent natural gas -- the Europeans live off Russian natural gas -- into the stratosphere, as it should have caused hoarding and a spike even here for recognition that no liquefied natural gas could come here because it would be needed so badly in Europe.

So why didn't it? From the beginning, I have said this is all economics: Supply wasn't able to meet demand. Supply wasn't constant -- it keeps dropping everywhere except Saudi Arabia -- but more important, demand did not slow down until the peak hit; at that point, which produced gasoline well above $4, we stopped using. We slowed driving incredibly. We carpooled, stopped taking excessive trips, turned in the SUVs and wiped out the most popular category of automobiles -- trucks -- overnight. Since Memorial Day, the wholesale shift has made it so the Valeros (VLO Quote) and the Tesoros (TSO Quote) have nowhere to put gasoline and little demand.