Cramer: China's Gone, So Oil's Headed Lower

This was originally published on RealMoney. It is being republished as a bonus for TheStreet.com readers.

It ain't a hurricane that controls oil. It is China. It isn't terrorism that controls oil. It is China. It isn't the lack of new finds that controls oil. It is China.

I know that there is a correlation between the dollar and oil, and I know that people flee to commodities when the dollar is weak.

But you have to marvel that oil can't get off this level with hurricanes being thrown at the Gulf left and right.

Here's how I feel about it: I believe that oil must be headed much lower, or you could not get this type of action. It has to, because China has simply stopped buying anything.

I urge people to recognize that the speculators certainly accentuated and exacerbated any moves in oil that might have been bullish, but the underlying bullish tendency was because of China, not any of the extraneous issues.

Now, one other possible thought about oil. One reason the natural gas stocks can't seem to lift is that there is a growing recognition that Boone Pickens is right: There's a surfeit of natural gas out there, and if we switch, it will kill oil.

That's the long-term reason why even if China comes back, I don't trust oil here, not at all. It is also the reason why you can see the UPS (UPS Quote)/FedEx (FDX Quote) mob moving up, as well as any other company that consumes energy.

This was originally published on RealMoney on September 8, 2008. For more information about subscribing to RealMoney, please click here.

TheStreet.com TV Rewind

From Cramer: Don't Be Fooled by Dollar-Oil Excuses (Video, Jul. 2):

Cramer: "Oil has nothing to do with the dollar, other than a miniscule amount of pricing... This thesis has cost you billions... It has made you focus on the dollar as opposed to focusing on supply and demand. It has made you feel that the U.S. is the 'swing vote' in oil. It's clearly not. [The swing vote is] China."

To watch the video, click the player below: