Queue the long-dormant U.S. recession chatter, with good reason.
Brent crude oil prices traded around $112 a barrel Friday as traders continued to digest the Biden administration's ban of imports of Russian oil, liquefied natural gas, and coal in response to the country's war on Ukraine.
Some on the Street have warned oil prices could surge to $200 a barrel.
Prices are off their highs of nearly $139 a barrel on optimism U.S. oil majors such as Exxon and Chevron will produce more to make up for any lost Russian output. Oil prices have surged roughly 23% since Russia's invasion of Ukraine.
Meanwhile, prices at U.S. gas pumps have skyrocketed above $4 a gallon on average, notes AAA.
Prices have climbed north of $5 a gallon in California. In Los Angeles, one gas station was charging almost $8 a gallon for premium unleaded reports The Daily Mail.
And last but not least, the Fed is likely to start raising interest rates this month to cool inflation.
With all of that in mind, here's what some top minds in business have said about the odds for a U.S. recession.
Jan Hatzius, Chief Economist at Goldman Sachs
"We now see the risk that the U.S. enters a recession during the next year as broadly in line with the 20-35% odds currently implied by models based on the slope of the yield curve," said Hatzius in a new note to clients.
The top Wall Street strategist cut his 2022 U.S. GDP forecast to a growth of 1.75% from 2% previously. Consensus estimates are looking for a 2.7% increase.
Brad Jacobs, CEO of XPO Logistics
"I have seen a few recessions over my career and they aren't fun," Jacobs said on Yahoo Finance Live. "I don't know that we are close to a recession. Right now the consumer is very, very strong and the industrial economy is in its early beginnings of growth. We do have to watch the effect of the European war and how that affects the world economy. We do have to look at how oil prices affect the world. And we do have to see how the Fed lands the plane in terms of raising interest rates in a careful way. But we are not close to a recession, absent some big geopolitical jolt. There is too much strength in the economy right now."
Ethan Harris, Bank of America Global Economist
"We will get a lot more worried if we see two kinds of developments. First, under our 'pessimistic' scenario with a major cut-off of Russian energy, we could see oil market prices spiking to $175/bbl and averaging $130/bbl for the year. Second, if inflation stays too high for too long central banks could get serious about fighting inflation. At this stage it looks like both the Fed and the ECB will hike rates closer to neutral but will not move significantly into tight territory. Combining a major oil shock with serious policy tightening implies a serious risk of recession," Harris penned in a new client note.
Joanne Feeney, Advisors Capital Management Portfolio Manager
"We are moving into a year which is further in the time from the worst of the pandemic. So we know growth is going to slow down just because of that. On the other hand, we have high inflation, we have the fiscal stimulus coming off and so consumers are facing a bit of a doubleheader of headwinds. So that is going to tamp down consumer demand into this year. And then we have the Fed raising interest rates. So we have three things conspiring to reduce production this year and weaken economic growth. As an economist, I can tell you we are seeing certainly slowing growth this year. But we don't see a recession. The reason for that is because on the supply side, we have a lot still coming back online after the pandemic and we have a new stock of semiconductors ready to come out in the second half of the year," Feeney said on Yahoo Finance Live.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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