Oil prices set to jump, but still 'manageable': Goldman Sachs - Yahoo Finance

Oil prices set to jump, but still 'manageable': Goldman Sachs

Goldman Sachs analysts predict oil prices will reach $100 per barrel, which could lead to higher gas prices for consumers but is not anticipated to be too much cause for concern. Yahoo Finance Markets Reporter Ines Ferre examines how crude oil prices will be "manageable", according to the analyst note, in comparison to previous price hikes in 2008 and early 2021.

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Video Transcript

- And we're watching oil prices as well. They've soared 30% since June. And Goldman Sachs is raising its target for Brent to $100 per barrel. And the concern now is that higher prices are going to take a toll on economic growth. Ines Ferre is here with a closer look. Ines.

INES FERRE: Yeah, Jared. And as you said, when you have higher oil prices, of course, you also have higher gasoline prices. The concern there is that it'll eat into disposable income. Also of course, the concern is that diesel prices being higher, that that means that to transport goods, that goes up. And therefore, goods and services also goes up.

But Goldman Sachs has a note out saying that higher oil prices could be a manageable headwind for the economy. Basically, Goldman Sachs analysts noting that the price of oil has gone up since June by about $20 per barrel. And there's three reasons why they're saying that they don't think that this will have a big impact on consumer spending or on GDP, even though they did lower their GDP forecast fractionally.

And this is because one of the things that they're saying is that the magnitude of the oil increase by $20 over the last several months, well, that is not as big of an increase that we saw back in 2008 or the big increase that we saw at the beginning of last year in the first half of 2022.

Also, the economists at Goldman Sachs saying that a GDP headwind would be partially offset by capital expenditure in the energy space and also lower electricity prices. Because if you take into account the price of coal, which has fallen back this year, and also the price of natural gas, which is needed for turbines to make electricity, then you should have electricity prices coming down a bit.

And lastly, what they're saying is that the fed is unlikely to tighten further in response to higher oil prices when you did see inflation trending down. Now Goldman Sachs has been pretty bullish also on oil, as you mentioned. Recently, Goldman Sachs also increasing its price target on Brent to $100 a barrel in the next 12 months, guys.