The price of oil fell sharply again on Tuesday as investors ran for the sidelines worried that the decline was a referendum on the global economy.
Brent has now fallen for a sixth straight session and U.S. crude pulled back for the fourth consecutive day.
"Oil and oil related stocks are about ten percent of the S&P 500," explained Cramer. Therefore when the price of oil goes down the energy sector follows.
But if your knee-jerk reaction is to sell stocks broadly on oil's decline, Jim Cramer thinks you're too short-sighted.
Source: Chipotle.com
Chipotle restaurant
"Can I just say for the moment that nothing could be more stupid and wrong," said the Mad Money host on Tuesday's broadcast.
"Oil's a tax on our country, both our businesses and our consumers."
Although the conventional wisdom on Wall Street right now is that for stocks to go higher, oil must go higher – the Mad Money host thinks nothing could be further from the truth.
"No amount of tax cutting is going to help small business as much as a decline in gasoline prices," he said. "Same goes for the consumer."
- Cramer's Top Dividend Stocks 2012
- Cramer's Ultimate Growth Stocks for 2012
- Cramer's Plays on a Potential Housing Rebound
Cramer fully expects that in a day or two the market will begin to recognize that lower oil is very positive for a wide range of stocks, "everyone from Pepsico and General Mills to Target and Costco," he said.
That should drive the market higher.
Even, if oil slides all the way down to $80 - again, don't freak out.
Don't consider the price action a sign the global economy is in trouble – instead consider it as a catalyst for companies to revise forecasts higher - forecasts that are currently coming down because of revenue weakness, said Cramer.
"No that's not being a Pollyanna," the Mad Money host insisted. "A delayed positive reaction in the stock market has happened many times before."
Call Cramer: 1-800-743-CNBC
Questions for Cramer? madmoney@cnbc.com
Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com
