There is an illusion afoot that the record July drop in oil prices is significant. It is not. As long as oil is well above $100, the inflationary effects will be damaging, and the ability of key industries, including the automotive and airlines, to recover will be significantly compromised.

The only real hope for parts of the economy that depend on a lower price of crude is that much of the run-up has indeed been caused by speculation. If so, crude may have much further to drop.

One of the key oil officials in Kuwait has commented that oil will not returned to over $144, but that it will not drop below $100. According to Reuters, "I don't think that prices will return to the record level, nor will they fall below $100 per barrel," Khaled Boodai told al-Seyassah newspaper. If he is right, a sustainable economic recovery is far off.

Much of the recent recovery of the stock market is based on the drop in oil. That means it is a mirage. Oil at $144 would have undermined all economic growth in the U.S. very quickly. As long as crude stays above $100, the process will still occur. It will just be a bit slower.

Douglas A. McIntyre is an editor at 247wallst.com.