Cramer: ‘We Have Oil Coming Out of Our Eyeballs’

I am going to challenge Cramer’s thesis here, featured in the video below, that the market is insane for following oil lower and that a drop in oil isn’t truly a harbinger of poor economic output anymore because, well umm, technical innovation is causing people to use less crude.  My core concern for a sharply lower stock market was never predicated around a pure economic downturn, but a bursting of a gigantic, cataclysmic, trillion dollar energy bubble that was built on the backs of much higher oil prices. I don’t give a shit if companies, like Cramer suggested, have found ways to drill oil cheaply, when the issue here is tied to debt loads and sovereign government that cannot  survive or refinance their debt at $40 crude.

If we were to take Cramer’s pollyanna view of energy seriously and suggest that technological innovation is truly advancing at a pace that will decoupled economic output from crude consumption numbers, then our friends in the middle east and the wide swath of energy companies with gigantic debt loads out there are far more doomed than even I previously expected.

They will drill as much and as fast as possible, selling at any price, knowing that prices are heading lower–due to a sweeping drop in demand. It will be like one gigantic margin call where Quatar, Iran, UAE, Saudi Arabia, Russia and American oil conglomerates all throw oil at the markets at once, in order to unload inventory.

Prices will crash. Banks will get severely ruined. Markets will drop. Economic activity will grind to a halt. The end.