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Greenspan Expects Energy Costs to Damp Global Growth

October 18, 2005|From Reuters

Skyrocketing energy prices will weigh on global growth but probably will exact a much smaller toll than surging oil prices did in the 1970s, Federal Reserve Chairman Alan Greenspan said.

"Although the global economic expansion appears to have been on a reasonably firm path through the summer months, the recent surge in energy prices will undoubtedly be a drag from now on," Greenspan said in remarks prepared for delivery in Tokyo to a group of Japanese businesspeople Tuesday.

"The effect of the current surge in oil prices, though noticeable, is likely to prove significantly less consequential to economic growth and inflation than the surge in the 1970s," he said.

Greenspan noted that oil prices remained below their inflation-adjusted peak of 1981 and said the world's economy had grown more energy efficient in recent decades.

A text of his speech, which did not address the outlook for U.S. monetary policy, was made available in Washington.

U.S. crude oil prices hit a record high of $69.81 a barrel in New York trading Aug. 30, after Hurricane Katrina shuttered much of the Gulf Coast's oil-producing and refining capacity. Oil futures closed at $64.36 a barrel Monday.

Greenspan noted that long-term oil futures prices had moved up close to current spot prices and said that suggested that markets didn't expect oil production to be adequate to meet rising world demand.

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