At the Investools 4th Annual Investor Education Conference in Dallas, Pickens reminded investors that OPEC's largest producer, Saudi Arabia, needs oil prices to remain elevated in order to maintain its social spending programs; therefore, the Organization of the Petroleum Exporting Countries (OPEC) will simply reduce production whenever it must in order to keep prices high.
"Oil is not a free market. OPEC sets the price of oil," Pickens told CNBC. "They can set the price because they produce 30 million barrels a day out of 92 million for the world...those 30 million barrels can be the swing factor."
With respect to domestic crude prices, which are now trading at less than $100 a barrel thanks to plentiful U.S. supply, Pickens said he thinks West Texas Intermediate could continue to decline, but not without consequences.
"WTI will do the same thing natural gas did, when there was too much natural gas [on the market], price[s] came down. If the [domestic] oil price gets to $80 a barrel, rigs will shut down," he said. "If it gets to $80 [it will] shut down West Texas."
Pickens admitted that recent declines in crude prices took him off guard, especially given the ongoing violence in the Middle East. He said that it appears the world is looking at international tensions differently than it has in the past.
"I've been surprised at the market and have actually taken a loss on Brent and North Sea crude," he said. "It seems like the world has accepted war in the Middle East. After a while investors say: 'OK, that's the way it's going to be,' and production hasn't been cut off any place."
According to Pickens, the U.S. can easily move away from higher priced OPEC oil and capitalize on North American resources.
"The U.S. is the largest user of oil in the world—18 million barrels," he said. "We produce 8.5 million barrels, so we're importing half of what we use."
Pickens went on to explain that of the imports, half come from Canada and Mexico, while only a little less than 2 million barrels actually come from the Middle East. On a relative basis, that's a small amount to find elsewhere, he said.
The U.S. is producing more of its own supply in recent years. In 1970, U.S. production peaked at 10 million barrels a day, but it declined over the next few decades to about 4.5 million barrels.
The U.S. will likely see domestic production spike further, Pickens said.
"[Analysts] are saying that we could get up to 14 million barrels a day in 10 years, I think," he said.
He also highlighted that the market didn't foresee the potential for what could be produced at home, and that's why the United States turned to the Middle East.
"We went to the Middle East because we thought that was where we were going to get oil, and it was a good decision...but what no one saw in the future was horizontal drilling. And there, you doubled your production. It was that simple," he said.
Another way to move away from OPEC is to import more Canadian crude, he said. The politically and environmentally controversial Keystone Pipeline, owned by TransCanada, is one way to do that, Pickens said.
Pickens also shared some investing ideas within the energy sector. Asked about Master Limited Partnerships (MLPs)—limited partnerships that have specific tax benefits because they distribute most of their cash flow to investors—he suggested they should be considered by energy investors, raising the point that Kinder Morgan's recent deal will urge others to look at how to unlock value.
Within the energy sector, Pickens highlighted the oil producers as a subgroup that presents investor opportunity; he also said to expect consolidation in the industry. One name he still likes is Pioneer Natural Resources, because of its massive Texas acreage and its drilling capabilities.
—By CNBC's Jackie DeAngelis.