Jim Cramer Says $40 Oil Would Drive US Inflation Down Sharply

Cramer's $40 Oil Scenario

CNBC host Jim Cramer argued on Tuesday's Mad Money that United States inflation is set to fall sharply, on one condition: crude at $40 a barrel. Oil feeds into food, recreation and motor vehicle insurance costs, he said, so a collapse to that level, paired with retailer-enforced price cuts, would send the Consumer Price Index lower; viewers would see it “come down and come down hard.” He pointed to a chart of Valero, the US oil refiner, as evidence pointing toward $40 crude, and the scenario carries a second assumption: that Walmart and Costco force their suppliers into price cuts. For readers tracking the pass-through, energy enters the index through several categories at once, which is why Cramer frames oil rather than any single line item as the swing factor. The arithmetic is demanding. A fall to $40 would require Brent crude oil (BZ) to lose roughly 56% from Tuesday's level near $92. That would erase, and then some, a rally that lifted the contract more than 15% in October and about 60% for the year through late September. Tuesday's tape already moved part of the way: Brent slipped to about $92 as President Trump held off strikes against Iran, and the contract also traded lower on a reported United States-Iran agreement covering the Strait of Hormuz. COINOTAG data puts the last price at $90.96, up 0.42% over 24 hours, within a $88.26 to $91.35 range. The scenario's weak point is escalation: renewed tension between Washington and Tehran could reverse the pullback and, with it, the disinflation case built on $40 crude. Whether Walmart and Costco would actually squeeze suppliers is likewise unconfirmed; the claim rests on a refiner chart and two corporate names, not on an announced policy change. What the argument fixes is the transmission chain: energy costs, then retail prices, then the inflation print the Federal Reserve watches.

A 0.4% October CPI Print, Two Fed Voices

October's inflation data landed before any oil relief could matter. Headline CPI rose 0.4% on the month, topping the 0.3% forecast, while core CPI, which strips out food and energy, gained 0.3%. The Consumer Price Index is the gauge the Federal Reserve treats as its inflation benchmark, and the hotter headline keeps a rate increase in play. Two officials split on what should follow. Fed Governor Christopher Waller said a 0.3% core reading would make him weigh a half-point hike in December. Dallas Fed President Lorie Logan, in separate remarks, called for at least two more quarter-point increases. Both officials responded to the printed figures rather than to the oil market, and neither tied their December view to a crude forecast. The print travelled straight into risk assets: Bitcoin fell as roughly $200 million in leveraged crypto futures positions were liquidated, evidence that rate expectations transmit into crypto as directly as into equities. Timing then sharpens the problem for anyone betting on Cramer's scenario. The Federal Reserve meets on December 8 and 9, one day before November CPI is published. Cheaper oil would therefore reach the data only after the rate decision, leaving risk assets exposed to the call first. The October reading now on the table reflects the contract's 15% rally that month, not any future decline; even if crude began sliding toward $40 immediately, the November CPI would capture only days of the move. That sequencing is why Waller and Logan anchored their comments to measured inflation rather than to an oil forecast: their December choices will price the economy as it prints today.

The technical picture does not yet cooperate with a fast slide. COINOTAG's composite scoring places the nearest resistance at $91.83, scored 99/100, just above the last price of $90.96, and the strongest support below the market at $89.34, scored 85/100. The daily trend reads as a downtrend, the 14-day RSI sits at 28.7 and the MACD signal is bearish, conditions consistent with a market consolidating after October's rally rather than collapsing. Derivatives positioning leans the same way: perpetual funding runs at -0.0685% per interval and open interest stands near $179.2 million. For Cramer's $40 target to come into play, price would first have to take out the $89.34 floor; until then, the December rate call, not crude, sets the inflation path.