Goldman Sachs CEO Warns Oil Shock Could Alter Consumer Behavior

Tightening crude oil supply will lead to consumer behavior changes in the second half of the year as the imbalance with demand pushes inflation higher, the chief executive of Goldman Sachs has warned.

Speaking at an industry event in New York, David Solomon suggested consumers are already changing their behavior in response to higher energy prices, and those changes could become more pronounced after July. He added, as quoted by Reuters, that the Fed will likely keep interest rates unchanged because of these developments.

“You can see some economic data in the next six months that shifts the sentiment,” Solomon said. “But for the moment, that’s not coming through.” Despite soaring energy prices, the top executive also added that investor sentiment about the tech industry is very optimistic. “We are definitely in a moment where there’s more greed than there is fear,” Solomon said.

U.S. inflation rose at the fastest rate in three years in April, prompting growing concerns about the rest of the year if the war in the Middle East drags on, which seems to be the most realistic scenario right now. Oil prices just got a fresh boost earlier today from reports about Iran launching strikes on targets in Kuwait and Bahrain, and the U.S. shooting at a tanker headed for the Iranian coast.

Brent crude was trading at over $97 per barrel at the time of writing, following the news, and West Texas Intermediate was at close to $95 per barrel.

Earlier this week, Goldman commodity analysts said in a note that demand destruction resulting from higher prices will somewhat soften the blow from physically tighter oil markets. “We see significant upside price risks from potentially more persistent Mideast supply losses but also meaningful price downside from weaker demand,” they wrote.

By Irina Slav for Oilprice.com

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