Jim O’Neill, chairman of Goldman Sachs Asset Management, got his PhD researching oil prices and their impact on economies. So, his opinion on oil is something worth paying attention to.
When asked what his biggest concern is going into March, O’Neill told CNBC, “oil prices. Plain and simple.” He said policy makers should try and bring down oil prices against short-term market pressures:
“I think as we saw a reminder of last year and we’ve seen repeatedly over most of my career, when oil prices rise persistently, they usually end up causing quite a bit of damage. That’s the biggest issue for me out there, course highly topical this week with the visit of the Israeli leadership to Washington, other than that not as much to worry about as most people seem to.”
O’Neill also said he sees a new long-term equilibrium for oil prices and that policy makers should try to lower oil prices against short-term pressures:
“…I like to look at the five-year oil price closely and intriguingly now getting on for two years that has not moved much at all, which appears to suggest that the longer term dynamics of the oil market are finding a new equilibrium perhaps somewhere between 80 – 100 bucks. It may not, but obviously if it were, that suggests the market have built up quite a big premium related to something and the something could be all the various and in particular the Iranian aspects of the Middle Eastern development. If i were a policy maker I’d be thinking about things like that myself.
In an investment note last week O’Neill said no one knows just what level of oil prices start causing damage through inflation and by hurting real incomes. He uses the five-year price as a broad guide to understanding the underlying supply and demand forces.
Watch the entire interview at CNBC: