Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Jim O’Neill: when does the oil price threaten?

Jim O’Neill: when does the oil price threaten?

Rising oil prices can have positive effects on the economy, although when the price of liquid gold hits a certain level it causes damage, said Jim O’Neill.

The chairman of Goldman Sachs Asset Management said a rise in relative energy prices is a major positive in encouraging conservation, efficiencies and the search for alternatives.

However, there is a level at which oil prices start to inflict damage by boosting inflation and depressing real incomes.

O’Neill said, though, no-one can predict this level. I am of the school that quite strongly believes it is probably best seen in terms of oil price-adjusted financial conditions to observe how strong or not any real economic damage can be,’ he said.

‘In this regard, so far, and especially because many leading nations continue to undertake steps to ease financial conditions – China and Japan being the two most important recently – it is probably not yet much of an issue.’

He added: ‘At some stage, though, it could become one.’

However, O’Neil said he finds it difficult to be as bullish as others on the oil price - which is currently around the $124 mark - due to factors affecting both the demand and supply side of the equation.

‘Data shows that OECD oil demand actually declined in 2011 and, as I have remarked before, China is falling in love with a softer future GDP growth path as well as alternative energies (and nuclear still) as part of its latest stage of development,’ said O’Neill.

‘On the supply side, there is evidence that some alternatives are starting to come on stream. Natural gas in the United States is a particularly important example, and one that is still far from appreciated by the financial markets.’

He added that alongside these points, the stabilization of the longer term price since late 2009 makes it ‘a lot more difficult’ to be as bullish as many others.

In this sense, if policymakers needed to take action to bring back down the oil price, it might be easier than in previous years, said O’Neill.

He added: ‘Certainly if I were a policymaker, it would be something I would contemplate. Anyhow, by coincidence, I am off down to the Gulf for a few days at the weekend and I look forward to hearing views down there about the topic.’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Big City Bright Future

Big City Bright Future

Big City Bright Future, the brainchild of BlackRock, is a three-week work experience programme for school leavers looking to forge a career in the City.

Play Kames' Ennett: Trump good for US high yield, but beware Europe

Kames' Ennett: Trump good for US high yield, but beware Europe

Kames Capital’s head of high yield David Ennett believes the changing political landscape will be a positive for the US, but negative for Europe in 2017.

Play Philip Milburn: why inflation won't run out of control

Philip Milburn: why inflation won't run out of control

Kames bond fund manager views inflation as more of 'scare' than a 'problem' and is positioning his portfolios accordingly.

Read More
Your Business: Cover Star Club

Profile: change is the only constant for Quilter Cheviot

Profile: change is the only constant for Quilter Cheviot

This is not the first time we have profiled David Miller, but at the time of his previous appearance his company looked very different.

Wealth Manager on Twitter