Wall Street bank raises US economy alarm
The United States will probably enter a recession if oil prices continue to soar and surpass $200 a barrel, Goldman Sachs chief economist Jan Hatzius said on Thursday.
“We estimate that it would take a sustained oil price increase to $200 per barrel to produce an income shock similar in magnitude to those that precipitated the 1974 and 1979 recessions – and this would significantly increase the 2022 recession odds,” Hatzius said in a note seen by Yahoo Finance.
The warning comes as top oil traders predict that prices could break the $200-a-barrel mark this year as a result of Western sanctions against Russia and the lack of alternative sources.
Moscow has warned of a price surge to $300 a barrel if the West abandons Russian oil. The Russian deputy prime minister and former energy minister, Alexander Novak, said that “some see it possibly reaching $500 a barrel.”
Prices for Brent crude have more than doubled compared to this time last year. They climbed as high as $139 a barrel at the start of the Russia-Ukraine conflict and the subsequent sanctions against Moscow. On Thursday, Brent was trading at $120 a barrel, while US WTI crude’s price stood at $114 per barrel.
Meanwhile, the national average price for gasoline in the United States hit historic highs after Washington banned Russian oil imports. The price is currently up 71.5 cents per gallon from a month ago and $1.37 per gallon higher than a year ago, according to GasBuddy.
The sharp rise has hit consumer confidence, raising concerns of a spending pullback which could lead the economy into a recession. President Joe Biden has claimed that Moscow is entirely to blame for surging US gasoline prices, conceding that he won’t be able to do much about runaway inflation at the pump.
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