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Oil at $100 could lift U.S. inflation, but persistence is key, Barclays says - INVESTING.COM
Investing.com — A surge in oil prices toward $100 per barrel would likely push U.S. headline inflation higher in the near term, although the longer-term impact will depend largely on how long prices remain elevated, according to analysts at Barclays.
The bank said oil at $100 would be “undoubtedly inflationary at the headline level,” but second-order effects on broader inflation would be limited unless prices stay high for an extended period.
Barclays estimates that a 10% sustained increase in crude oil prices could add roughly 0.2 percentage points to headline CPI within one to two months, mainly through higher gasoline prices.
However, the pass-through to core inflation is expected to be smaller and slower, as energy price shocks typically affect headline prices more directly than underlying inflation.
The bank noted that what ultimately matters for consumer inflation is gasoline prices rather than crude oil itself, as crude accounts for only about half of the final retail gasoline price, with refining and distribution making up the remainder.
Barclays said gasoline prices usually reflect about 50–60% of crude oil price changes, with the adjustment typically occurring within two to three weeks.
The current situation also differs from the 2022 oil spike following Russia’s invasion of Ukraine. At that time, global supply chains were already strained and governments were injecting fiscal stimulus into the economy, amplifying inflation pressures.
Today, Barclays says the macro backdrop is softer, with cooling consumer spending, more slack in the U.S. labor market, and inflation coming in weaker than expected in 11 of the past 12 months.
Under its baseline outlook, Barclays forecasts headline CPI at 2.7% year-over-year and core CPI at 2.8% by December 2026, assuming oil prices do not remain elevated for an extended period.
Still, the bank warned that a prolonged period of oil near $100 could push headline inflation closer to 3% by late 2026, potentially delaying Federal Reserve rate cuts if inflation expectations begin to rise.
