Oil is a beast. It is not the fact that it has been declining that is so frightening to Jim Cramer, it is the velocity and speed at which it has been doing so.
The crude animal finally took a breather on Wednesday and stopped its decline. As a result, the market responded in a rally. Whew!
It is just a matter of time until the Federal Reserve raises interest rates. Yet Fed Chief Janet Yellen chose to be patient about raising rates, a prudent move at a time where employment numbers and retail sales are doing better.
"She doesn't have to state the obvious, that the velocity of the decline in oil is wiping out whole economies, which could cause severe deflation and the unraveling of a lot of the good work the Fed has done," the "Mad Money" host said.
So, while oil did go for a run with the bulls on Wednesday, Cramer still wants oil to decline. There are just too many positive implications for the U.S. consumer for cheaper oil.
The key is that while Cramer wants oil to sell off, it has to happen gradually. He spelled out the reasons why it is so important for oil to decline slowly.
First, is Russia. Not only are the banks there stretched, with the economy threatening to fall into a severe recession, but the country could affect Europe as well.
"At some point, Putin could decide to commit financial suicide in the name of Russian hegemony and go into Ukraine guns blazing. And if that happens, Europe could go into a depression, and we're all back in the soup," Cramer said.
Then, there are the Brazilian and Mexican national oil companies, Petrobras and Pemex. If oil keeps breaking down with speed, so will Petrobras, which is 60 percent owned by the Brazilian government.
Additionally, the Mexican government is counting on Pemex to help grow its economy. However the enormous liability of $100 billion that Pemex has is daunting. A break in the decline in oil could give the Mexico some breathing room.
Essentially a slow decline in oil will prevent a run on the currencies of Brazil and Mexico, which is good for emerging market investors.
The third positive to slower oil is the possible collapse of the corporate bond ETF HYG. This index has a ton of oil-related debt.
"This isn't a canary in a coal mine signaling that something's wrong, it's a gosh-darned mine collapse that's occurring, and a lift in oil may be the trick to shoring things up," Cramer explained
Lastly there are the U.S. oil producers. This doesn't require a ton of explaining—they're not doing well. When oil plummets, potential investors don't even attempt to bottom fish because they are afraid of bankruptcy.
Cramer thinks that if oil can just take a breather from going down so quickly, the beaten down oil companies can take time to hedge their risk in the futures market, or even sell off property to pay bank debt.
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Finally crude and the market had some breathing room on Wednesday, thanks to the Fed. However, Cramer warned to be wary of a decline ahead.
"The bulls rejoiced while the bears got caught short in a rip-your ursine face off rally that will last as long as oil stabilizes or even goes higher, before resuming its decline again," he said.
Hopefully this time, it's a slow decline.
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