Oil prices rise to $100 or could push up U.S. inflation, but sustainability is key, Barclays says

Investing.com — Barclays analysts say that a surge in oil prices to $100 per barrel could temporarily push up overall U.S. inflation, but the long-term impact will largely depend on how long prices stay high.

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The bank states that reaching $100 oil “undoubtedly will cause inflation at the aggregate level,” but unless prices remain high for an extended period, the secondary effects on broader inflation will be limited.

Barclays estimates that a sustained 10% increase in crude oil prices could raise the overall CPI by about 0.2 percentage points within one to two months, mainly through higher gasoline prices.

However, the transmission to core inflation is expected to be smaller and slower, as energy price shocks typically have a more direct impact on overall prices than on underlying inflation.

The bank notes that what truly matters for consumer inflation is gasoline prices rather than crude oil itself, since crude oil accounts for only about half of the final retail gasoline price, with the rest coming from refining and distribution.

Barclays states that gasoline prices usually reflect about 50-60% of changes in crude oil prices, with adjustments typically completed within two to three weeks.

The current situation also differs from the oil price surge after Russia’s invasion of Ukraine in 2022. At that time, global supply chains were already tight, and governments were injecting fiscal stimulus into the economy, amplifying inflation pressures.

Today, Barclays says the macroeconomic backdrop is more subdued, with cooling consumer spending, a more relaxed U.S. labor market, and inflation data for 11 of the past 12 months coming in below expectations.

Under its baseline outlook, Barclays forecasts that by December 2026, overall CPI will increase by 2.7% year-over-year, and core CPI by 2.8%, assuming oil prices do not stay high for a prolonged period.

However, the bank warns that if oil prices remain near $100 for an extended period, overall inflation could approach 3% by the end of 2026. If inflation expectations start to rise, it could delay the Federal Reserve’s rate cuts.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.