How gas prices and inflation could impact midterm elections

New York (CNN Business)High oil and gasoline prices will need to rise even higher this summer to incentivize new production and discourage consumption, according to Goldman Sachs.

The Wall Street bank is now forecasting Brent crude oil prices will average $140 a barrel between July and September, up from its prior call of $125 a barrel. Brent is currently trading at about $120 a barrel.
Worse, Goldman Sachs said summer retail gas prices are going to need to spike to levels normally associated with $160 oil in order to curtail demand.

    “A large spike in prices remains quite possible this summer,” Goldman Sachs strategists wrote in a report to clients.

      The forecast suggests that the worst is not nearly over for consumers already dealing with high gas prices.

      The national average price for regular gasoline jumped another five cents on Tuesday to a fresh record of $4.92 a gallon, according to AAA. That’s up by 30 cents over the past week and 62 cents in the past month.
      “It’s driving me crazy. I’m looking at this thing right now — $5.99? Are you serious?” asked Cleavie Jordan, an MTA conductor filling up his tank in Manhattan.

        Thirteen states and Washington, DC already have an average gas price of $5 or higher, with New Jersey, Massachusetts and Maine hitting that threshold Tuesday. Ohio, Pennsylvania, Utah and Idaho are just pennies away from $5.
        Goldman Sachs is now calling for Brent oil to average $135 a barrel during the second half of this year and first half of next. That’s up $10 from the bank’s previous forecast.
        “We believe oil prices need to rally further to normalize the unsustainably low levels of global oil inventories, as well as OPEC and refining spare capacities,” Goldman Sachs strategists wrote.
        In March, Brent briefly spiked to a nearly 14-year high of $139.13 a barrel. But that proved temporary as oil prices quickly retreated from there. Goldman Sachs is calling for a more sustained spike, where Brent would average $140 for the entire quarter.
        That’s just shy of the $150 level that Moody’s Analytics economist Mark Zandi warned would spell major trouble for the US economy.

          “If oil prices go to $150, we are going into recession” Zandi told CNN. “There is no way out.”
          The bank did not specify how high it anticipates gasoline prices to go, saying only that oil prices need to get so expensive that they cause a 500,000 barrel-per-day decline in demand to rebalance the market.
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