Peter Schiff: ‘Rising oil prices won’t cause higher inflation’ amid X backlash — says recession, deficits will instead. What it means for your money

In a recent post on X, Schiff argued that higher oil prices won’t directly drive inflation at all (1).

“Rising oil prices won't cause higher inflation. More expensive oil means Americans will have less money to spend on other things. Reduced spending will cause a recession, which will result in larger budget deficits, rate cuts, and QE. That's what will cause higher inflation,” he wrote.

By ‘QE’, Schiff is referring to quantitative easing. It’s a strategic tool the central bank uses to stimulate the economy when spending slows down.

That view runs counter to the standard narrative around inflation. Instead of focusing on the immediate price hikes, Schiff is pointing to what happens next, and how policymakers respond.

Schiff’s argument flips the story

At its core, Schiff’s point is about sequencing. In his view, rising oil prices don’t directly lead to inflation. Instead, they set off a chain reaction:

Higher oil prices mean consumers spend more on energy. That leaves less money in the pocket for other spending, which slows the broader economy. As growth weakens, the risk of a recession rises.

From there, Schiff expects a familiar policy response: Governments run larger deficits to support the economy. The central banks then cut interest rates. Thus, the cycle comes full circle.

It’s that combination, Schiff wrote, that fuels inflation.

A simple example of how Schiff’s idea plays out

Imagine gas prices jump by $0.75 per gallon.

For many households, that adds up quickly. A driver filling up a 15-gallon tank could be paying more than $11 extra per fill-up. Over the course of a month, that can mean a noticeable increase in fuel spending just to maintain the same routine.

That money has to come from somewhere.

It might mean fewer dinners out, fewer online purchases, or cutting back on services. Multiply that behaviour across millions of households, and demand starts to weaken in other parts of the economy.

That’s ultimately what Schiff is talking about.

How this looks in real life

There’s real-world precedent behind Schiff’s thinking.

Oil shocks have historically coincided with economic downturns. The Oil Shock energy crises of the 1970s helped push the U.S. into recession (2), and a surge in oil prices preceded the 2008 financial crisis (3).

The correlation is so well-documented that Steven Kopits, the Managing Director and President of Princeton Energy Advisors, wrote that they are “essentially synonymous” in a recent blog post.

Energy costs behave a lot like a tax on consumers, cutting into disposable income and limiting spending elsewhere. That consumer-hostile economic environment is exactly what investors are preparing for.

Why some investors turn to gold in uncertain markets

When investors start worrying about both inflation and recession at the same time, traditional assets don’t always behave as expected.

That’s one reason gold often comes back into focus. It’s commonly viewed as a hedge against both inflation and currency debasement, particularly when central banks implement aggressive stimulus.

Schiff, a highly vocal supporter of gold and owner of gold-selling companies, recently posted on X that “falling real rates are bullish for gold” (4).

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Gold is one way investors try to protect against inflation. But it’s not the only approach.

Why real estate still draws attention in inflationary environments

That’s where real estate comes in.

Unlike assets like gold, income-producing properties can generate cash flow while also benefiting from rising rents over time.

You can tap into this market by investing in shares of vacation homes or rental properties through Arrived.

Backed by world-class investors, including Jeff Bezos, Arrived allows you to invest in shares of vacation and rental properties, earning a passive income stream without the extra work that comes with being a landlord of your own rental property.

To get started, simply browse their selection of vetted properties, each chosen for its potential appreciation and income-generating potential. Once you choose a property, you can start investing with as little as $100, potentially earning quarterly dividends.

Larger-scale real estate investments

Owning a rental property sounds great, until something goes wrong. One bounced check, and your rental income disappears.

But institutional investors don’t face that problem. Their portfolios are diversified across hundreds — sometimes thousands — of units.

Now, accredited investors can tap into that same approach through platforms such as Lightstone DIRECT, giving you access to institutional-quality multifamily and industrial real estate — with a minimum investment of $100,000.

Founded in 1986 by David Lichtenstein, Lightstone Group is one of the largest privately held real estate investment firms in the U.S., with more than $12 billion in assets under management.

Over nearly four decades, their team has delivered strong, risk-adjusted performance across multiple market cycles — including a 27.6% historical net IRR and a 2.54x historical net equity multiple on realized investments since 2004.

With Lightstone DIRECT, you gain access to the same multifamily and industrial deals Lightstone pursues with its own capital .

Here’s the kicker: Lightstone invests at least 20% of its own capital in every deal — roughly four times the industry average. With skin in the game, the firm ensures its interests are directly aligned with those of its investors.

But all of these strategies hinge on one key assumption — that Schiff’s view of how oil prices feed into inflation is actually right.

Where there’s pushback

Not everyone agrees with Schiff’s framing.

In fact, many X users jumped in to argue Schiff’s position, claiming that rising oil prices can be inflationary right away, not just through policy responses later.

One such commenter is Keith Woods, the author of Nationalism, who wrote, “Great illustration of how simplistic the libertarian understanding of economics is. For Peter, inflation simply has to always be central bank-driven and downstream of ‘money printing’ (5).”

He added that “an oil shock is the classic case of cost-push inflation because it raises production costs.”

The International Monetary Fund also notes that supply shocks, such as those in oil, can drive “cost-push” inflation by raising production costs across the economy (6). In practice, that means higher fuel costs don’t just hit consumers at the pump.

They hit everything a consumer pays for.

Trucking costs rise, pushing up grocery prices. Airlines face higher fuel costs, which then raise ticket prices. Manufacturers pay more to ship goods, which is passed on to consumers in higher retail prices.

That’s where Schiff’s argument diverges from the mainstream view. While he focuses on how higher oil prices reduce spending and slow the economy, there is an immediate impact on prices.

What does rising oil and inflation mean for your wallet?

Higher oil prices could eventually tip the economy into a slowdown, triggering rate cuts and renewed stimulus. That could bring volatility and a policy-driven rebound in asset prices.

But if inflation remains stubborn, keeping interest rates higher for longer will continue to pressure household budgets.

Either way, the uncertainty isn’t going away overnight.

Looking beyond stocks during volatile cycles

In periods where both stocks and bonds face pressure, some investors look beyond traditional markets.

“It’s likely there’ll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months.”

That’s according to Goldman Sachs CEO David Solomon, speaking at the Global Financial Leaders' Investment Summit in November 2025.

Meanwhile, the Shiller P/E has just soared past 40x, a level last seen in 1999, hinting that the decade ahead may bring below-average returns for those tied to the S&P 500.

With these warning signs, diversification isn’t just smart — it’s essential. Billionaires like Jeff Bezos and Bill Gates continue to invest heavily in stocks, but they also allocate a portion of their portfolios to assets that behave differently from the market.