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Moody’s Chief Economist: Surging Oil Prices Are a Threat to the Economy

"Speaking with CNN, Moody’s Chief Economist Mark Zandi said, ‘It’s the most serious threat to the economy. Nothing does more damage to the economy more quickly than higher oil prices.’”

Zandi noted that a surge in oil prices could dampen consumer spending and delay anticipated Federal Reserve interest rate cuts. 

U.S. oil prices are nearing $90 per barrel, fueled by conflicts in the Middle East, Mexico, and OPEC+ purposely decreasing production. Supply chain problems in the Red Sea have driven gasoline prices to their highest in five months. 

The geopolitical tensions involving Iran and its response to a recent airstrike and the fears of further oil supply disruptions are also pushing prices upward.   

High gas prices are already impacting the 2024 elections. Rising oil prices impact consumer behavior and economic perceptions, particularly among middle- and lower-income households. High gas prices also impact voter behavior, which could politically benefit former President Donald Trump. 

It will be interesting to see how the Biden administration responds. 

More from Zandi: “We can digest $85 or $90 oil. If we go over $90 and closer to $100, that’s a problem. Consumers are going to get nailed – especially lower-income households. And it undermines confidence. People look at the price of gas as a litmus test for their own financial situation.”

With California’s special fuel blends and reliance on imported foreign oil, residents of the Golden State are likely to see even higher prices at the pump than those living outside the state.

For more information, contact Sean Wallentine.


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