Pros: Don’t Fear High Oil; Won’t Derail Recovery

Should oil climb to $100 a barrel, the "Fast Money" traders on Thursday said the high price won't derail the U.S. economic recovery, but it will disrupt the rally.

“I think money is going to the sidelines right now,” said EmergingMoney.com’s Tim Seymour. “I don’t think anybody knows what to do.”

On Thursday, the Dow and S&P 500 opened in the red following Wednesday’s oil-fueled sell-off. News of production halts in Libya, a nation that produces about 1.6 million barrels of oil per day caused NYMEX crude to briefly touch $100 per barrel intra day on Wednesday.

Investors fear higher oil prices will take a chunk out of corporate profits and, if sustained, destroy the U.S. recovery by forcing consumers to cutback on discretionary expenditures in order to pay the gas bill.

Rising oil prices coupled with the U.S.’s 9.8 percent unemployment rate is, “not good for discretionary spending in general,” wrote Trutina Financial’s Patty Edwards in a note on Thursday.

Economists estimate that every sustained $10 rise in oil prices can shave 20 basis points to 50 basis points off of gross domestic product. And there are few signs that the risk premium for oil will disappear in the near-term given the ongoing regime change in Egypt and continued unrest in Bahrain, Libya, Tunisia and other nations in the Middle East.

Still, investor fears for the U.S. recovery are premature, says Deutsche Bank’s Chief U.S. economist Joe Lavorgna. He estimates that oil prices would have to surge another $25 per barrel — and stay there — before U.S. production was really impacted.

“High oil prices have surrounded every recession since ’73, so it cannot be immediately dismissed,” Lavorgna said. “But I think people are too caught up in looking at what happened in the '70s and '80s. The correlation between GDP and oil has broken down.”

• Latest Futures Prices:Crude Oil | Brent Crude | RBOB Gasoline

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Trader disclosure: On Feb 24, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL); Seymour owns (BAC); Seymour owns (F); Seymour owns (FCX); Seymour owns (GE); Seymour's firm owns (GM); Seymour's firm owns (PBR); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Adami's wife works for (MRK); Finerman's Firm Is Short (IWM); Finerman's Firm Is Short (SPY); Finerman's Firm Is Short (MDY); Finerman's firm is short (XRT); Finerman's firm is short (IJR); Finerman's Firm Is Long S&P Puts; Finerman's Firm Is Long Russell 2000 Puts; Finerman's Firm And Finerman Own (AAPL); Finerman's firm owns (AVP); Finerman's Firm Owns (BAC) Leap, Finerman Owns (BAC); Finerman's Firm Owns (BBY); Finerman's Firm And Finerman Own (BP); Finerman owns (DECK); Finerman's firm owns (FCX) puts; Finerman Owns (GOOG); Finerman's Firm And Finerman Own (HPQ); Finerman's Firm Owns (IBM); Finerman's Firm Owns (JPM), (JPM) Leap; Finerman Owns (JPM); Finerman's Firm Owns (M); Finerman's Firm And Finerman Own (MSFT); Finerman's Firm Owns (WMT); Terranova Owns (VRTS); Terranova Owns (C); Terranova Owns (UPL); Terranova Owns (ABT); Terranova Owns (MS); Terranova owns (TEVA); Terranova Owns (BAX); Terranova Owns (CVI); Terranova Owns (RSX); Terranova Owns (SU); Terranova Owns (CNQ)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
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For Brian Kelly
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For Joe LaVorgna
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Reggie Middleton
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For Amerlia Bourdeau
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Fast Fire SOT
Seymour's firm owned (TTM) on 2/18/2011

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