Goldman Sachs: Why $30 Oil is ‘Too Much of a Good Thing’ for the U.S. Economy

5 Apr 2016   Economy, Prices, USA

Federal Reserve Chair Janet Yellen raised more than a few eyebrows in a Mar. 29 speech by highlighting oil prices at less than $30 per barrel as a development that “would tend to restrain U.S. economic activity.” While lower oil prices bring about a front-loaded hit to growth — as energy-producing firms respond by curtailing investment and employment — the net effect of lower oil prices was expected to be positive, with a lag. After all, cheaper fuel prices are considered a form of stimulus for the U.S. consumer, the largest segment of the economy. And despite the shale revolution, the U.S. remains an oil-importing nation. Yellen later clarified that lower oil prices “likely will boost spending and economic activity over the next few years,” explaining that the downside risks of low prices potentially reflected “market concern that the price of oil […]

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