Goldman Sachs says that while a sustained climb in oil prices could slow consumption and economic growth it will be a "manageable headwind" for the U.S. economy.
- "While we forecast consumption growth to slow during the fall and winter, we think higher oil prices are unlikely to cause consumer spending and GDP to decline"
The note from GS economists goes on to discuss four key reasons why the Goldman team isn't too concerned about the surge in oil prices. In summary:
- the magnitude of the oil-price increase is relatively small "Oil prices have risen by $20 per barrel -- compared to +$40 in the first half of 2008 and +$45 in the first half of 2022 -- and our forecast of retail gasoline prices using futures and wholesale markets indicates that most of the rebound has already occurred,"
- "offsetting positive effect" of higher energy-sector capital expenditure (CapEx), will give a GDP growth boost from the CapEx change.
- the year-to-date pullback in coal and natural-gas prices, as well as the end of the summer heat waves will bring electricity prices lower during the fall ... would also boost consumer incomes and likely consumption ... offsetting roughly one-quarter of the gasoline headwind
- Goldman does not expect the Fed to tighten monetary policy in response to oil prices as long as the price moves tend to be short-lived. "The Fed should worry about the implications for price stability only if higher oil prices contribute to a de-anchoring of inflation expectations ... We are relatively unconcerned about this risk and we do not expect the recent oil move to meaningfully boost consumer inflation expectations."
