Europe to bear greatest costs while inflation fight in U.S. gets tougher.
China, the world’s largest oil importer, will probably strain to reach this year’s economic growth target while developing countries in North Africa and the Middle East confront the danger of social unrest over rising energy and food costs, economists said.
Still, Capital Economics says it would take oil prices of $200-plus to trigger a U.S. recession. One reason is that U.S. households together have an ample $2.5 trillion savings cushion, dwarfing the estimated $150 billion to $200 billion cost to consumers of higher pump prices, said Ian Shepherdson, chief economist of Pantheon Macroeconomics.Though Russia accounts for just 2 percent of the world economy, it is a major player in global energy markets.
Predicting the future of Russian oil sales — and global prices — is especially hazardous. If U.S. allies in Europe overcome their economic worries and agree to a complete embargo on Russian energy, oil prices could hit $160 a barrel, according to Capital Economics. Bjornar Tonhaugen, an analyst with Oslo-based Rystad Energy, told clients this week that oil could hit $240 this summer in a worst-case scenario, according to a Bloomberg report.
Some private assessments are gloomier. Goldman Sachs said Thursday that euro-zone output will shrink in the second quarter. Eric Winograd, a senior economist at AllianceBernstein, puts recession chances at better than 50 percent. Others see higher energy costs pushing Europe perilously close to the brink.“Maybe growth is not negative, but it kind of kills the bounce back from covid,” said Sergi Lanau, deputy chief economist of the Institute of International Finance.
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