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Alan Greenspan said Wednesday (June 7) that while the country has been able to absorb sharp increases in oil prices, high energy costs are beginning to stunt economic growth.
According to an Associated Press report, he also said sharply higher oil prices have not produced any “serious erosion” of world economic activity.
“The United States, especially, has been able to absorb the huge implicit tax of rising oil prices so far,” Greenspan told a Senate hearing. It was his first appearance before Congress since leaving the Federal Reserve in January.
However, he added, “recent data indicate we may finally be experiencing some impact.”
Greenspan said high oil prices, exceeding $70 a barrel and pushing gasoline costs beyond $3 a gallon in many areas, are due to a sharp decline in spare global oil production capacity, refinery shortages and, to some extent, market speculation.
But he said market speculators also have been able “to hasten the adjustment” to higher prices and eased the shock to the economy.
American business “to date has largely succeeded in finding productivity improvements that have contained energy costs.” But he said consumers “are struggling with rising gasoline prices.”
Greenspan said with limits on U.S. oil reserves “we are not going to be a price setter in oil anywhere in the foreseeable future” unless there is a significant reduction in demand.
But he said “current oil prices over time should lower to some extent our worrisome dependence on petroleum” with the development of alternative fuels and broader use of electric-hybrid cars. This “would help to wean us of our petroleum dependence,” Greenspan said.