Betting on Oil, Inflation Now a Crapshoot: Economist

Currently,oil pricesare just as likely to rise as to fall and, consequently, there's a 50 percent chance that recent rises in European inflation are behind us, according to Carl B. Weinberg, chief economist at High Frequency Economics.

"Inflation is a sustained, proportionate increase in the prices of all prices and wages in an economy," Weinberg said in a research note Thursday. "If you want to believe that crude oil prices are going to trigger a sustained inflation episode, then the first thing to ponder is whether you believe the current episode is the start of a sustained increase in oil prices."

But the bet that unrest in the Middle East and North Africawill push oil prices up even more is "a crapshoot," he said.

Those worried about and end to oil shipments "are the same people who did not see the troubles in Egypt, Tunisia and Libya coming," Weinberg said. "We figure the market has already discounted the worst possible scenario at even-money odds."

The "takeaway from all this is that the bulk of the pass-through of crude oil prices to consumer price indexes -- even in Euroland, where the pain is greatest-- is just as likely to be behind us as in front of us," he said.

"Economists, central bankers and traders ought to remember that every even-money bet has two sides," he added.