Cramer still regards lower oil prices as positive since the U.S. is a net importer of energy and a net consumer of gasoline, heating oil and natural gas.
"The answer is that OPEC has effectively dissolved. This oil cartel, founded in 1960 to boost prices, has pretty much been disassembled by its own members because they are so at odds with each other," Cramer said.
Cramer explained his perspective, stating that Saudi Arabia is a rich country that hates Iran, a poor country. The Saudis do not want Iran to get lots of money to rebuild its oil facilities.
Additionally, the Saudis view Iraq as a proxy state for Iran, so it does not support Iraq either. In the meantime, Saudi Arabia does not want to lose market share in the U.S. or Canada, so it makes sense to cut prices to keep those relationships.
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That means that the world's largest economy is the winner in a scenario where the Saudis want to give the gift of cheap oil.
The problem is that Cramer sees big institutions walking away from all fossil fuel stocks, especially with global warming as a hot topic. Any climate conference will prompt portfolio managers to steer clear of the sector.
But the bigger problem is with the pipeline companies. While many pipelines are doing just fine, these types of companies rely on the need for more pipelines to be built in areas where oil drilling occurs. The U.S. has stopped a lot of its drilling because the Saudis are flooding the world with oil.
So the build out of new pipelines won't work if the drilling isn't happening. As a result, many areas are over-piped. The massive decline in Kinder Morgan is evidence of this, as many fear that it will cut its dividend.
"Lower oil prices aren't helping the market, as they should. Instead they are hurting it because so many individuals are panicking out of both the bad stocks, and the good ones," Cramer said. (Tweet This)
Cramer recommended for investors to allow the selling to occur, until it stops. Then it will be safe enough to pull the trigger on high-quality stocks at bargain prices.