Cramer: Low $30s is the magic price for oil

There is something about the price of $30 crude that makes investors excited about stocks. Jim Cramer wondered if perhaps it is some sort of equilibrium number that gives investors the green light to buy.

"I will say this, the slowing of the velocity of the decline in oil does create a positive backdrop for so many industries, and at this particular level, it allows for many oil companies to stay in business while they ratchet back expenses," the "Mad Money" host said.

At the price of $33, Cramer thinks oil is in a bit of a sweet spot. Gasoline finally sells at $1.77 a gallon nationally, which is the equivalent of a big tax cut for everyone. Companies are finally recognizing that the price of natural gas won't go up any time soon, so they can afford to build factories in the U.S. instead of elsewhere.





A worker at the Lukoil company-owned Imilorskoye oilfield in Kogalym, Russia, January 25, 2016
Sergei Karpukhin | Reuters
A worker at the Lukoil company-owned Imilorskoye oilfield in Kogalym, Russia, January 25, 2016
"The best of all possible worlds, therefore, might be with oil in the low $30s." -Jim Cramer

Lower energy prices do benefit the consumer; however, the problem seems to be that Wall Street cannot figure out what consumer it benefits.

"The average income in this country is $52,000," Cramer said. "Tell me that saving $650 won't matter to that person? That's what the average family will save if gasoline stays here."

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Another positive element is that the lower gasoline prices will encourage individuals to move further away from urban centers. That will boost the bottom line of new homes built in 2016.

Additionally, the travel, leisure and retail companies will benefit from the extra cash in consumer pockets.

On top of that, energy products cannot withstand another rapid decline of oil prices. Currently, the energy companies are concentrated in roughly nine states, but the economic activity in those states isn't enough to make up for what could happen if there were a sudden loss of jobs or bad loans.

If there is a slow decline, this will allow the companies enough time to cherry pick the best properties, cut costs and avoid bankruptcy.

"The best of all possible worlds, therefore, might be with oil in the low $30s," Cramer said. (Tweet This)

If oil stays in the low $30s, the price of gasoline can stay under $2 and help the consumer. It could also give companies a chance to catch their breath, lower costs and stay in business.

The only flaw to this logic that Cramer could find is that oil prices will not go up any time soon as production remains too high. That is bad news for those oil companies banking on higher prices.

As a result, there will be winners and there will be losers.

"For the most part, the scenario I just traced out is one that does not make the oil companies investible, but it does make everyone else a little better off," Cramer said.

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