Goldman Sachs predicted on Monday that prices for Brent oil could hit $140 per barrel this summer, up from about $120 currently, as gas prices approach or exceed $5 a gallon throughout the United States.
The firm’s forecast for the third quarter of the year is already up from an earlier prediction of $125 per barrel. The report also predicted that by the fourth quarter of 2022 the price could go back down to about $130 a barrel.
“We acknowledge the risks to our supply and demand forecasts given the still uncertain paths of Chinese demand and Russian exports,” Goldman Sachs said in its report.
The spike in oil prices comes as Russia continues its invasion of Ukraine and Western countries increase drastically scale back imports of Russian oil, shaking the global energy market.
“Widespread import bans of Russian oil have now been announced by Western importers,” Goldman noted, adding that the bans “will force a large and imperfect redirection of barrels — due to contracting, shipping, and slate constraints — to mostly Asian nations while the rest, finding no home, will have to be shut-in.”
“The main risk that would loosen the short-term tightness would be a shift to tariffs on Russian exports, allowing for a normalization in flows, albeit with lower revenues for Russia,” the report added.
The record gas prices have been a growing political liability for the Biden administration and Democrats heading into November’s midterms, as one piece of soaring inflation across the economy.
The Department of Energy has said it would solicit bids to buy 60 million barrels of oil to help start to replenish the Strategic Petroleum Reserve after a release in recent months aiming to bring gas prices down.
Some 180 million barrels have been released since Russia invaded of Ukraine, and the administration aims to replenish about one-third of that amount.
“As we are thoughtful and methodical in the decision to drawdown from our emergency reserve, we must be similarly strategic in replenishing the supply so that it stands ready to deliver on its mission to provide relief when needed most,” Energy Secretary Jennifer Granholm said in a statement at the time.