"Two Ways to Play"-Kevin Depew of Minyanville
Thursday, June 11, 2009SUSIE GHARIB: Oil at $72 a barrel: green shoot or economic time bomb? Tonight's "Two Ways to Play" says it could be a bit of both. Here's Kevin Depew of Minyanville and Minyanville's Kevin Depew.
KEVIN DEPEW, EXECUTIVE EDITOR, MINYANVILLE.COM: Crude oil is back above $70 a barrel and yesterday, the International Energy Agency raised its demand forecast for the first time since last August, when oil was trading well north of $100. While higher oil prices eventually translate into higher prices at the pump, the irony is that we want higher oil prices. Why? Because weak oil demand equals weak economic growth. Global oil consumption this year is still on pace to drop by the most since 1981, but an increase in oil prices fueled by an improvement in demand signals this recession is likely bottoming out. Let me get this straight -- according to bulls, higher oil prices are good for the economy because that means demand is increasing, while lower prices are good because that puts more money in the pockets of consumers. Heads we win, tails we win, too. But what's really going on is the absence of real demand is simply being cushioned by free money from central banks. The net result is not an increase in the real value of oil, but a decrease in the value of our money in oil terms. So rather than being heads we win, tails we win, its more like hey, where did my coin go?
