Greenspan Expects High Price to Lead to More Fuel Supplies
http://www.nytimes.com/2005/04/06/business/06greenspan.html?pagewanted=print
According to Greenspan
****
ASHINGTON, April 5 - Alan Greenspan, chairman of the Federal Reserve, said on Tuesday that oil and natural gas markets were under the heaviest strain in a generation and suggested that prices might remain high for some time.
But Mr. Greenspan was optimistic about the long-run outlook for energy supplies, and he warned against efforts to "distort" or "stifle" prices set in global markets.
Mr. Greenspan was silent about the potential impact of higher oil prices on inflation or economic growth, or on the central bank's monetary policy.
"Markets for oil and natural gas have been subject to a degree of strain over the past year not experienced for a generation," he said in a speech beamed by satellite to petrochemical executives in Texas.
Noting that investment in new production capacity has lagged the growth in demand for oil, particularly from China, Mr. Greenspan said much of the "slack" in world energy markets had disappeared.
...
He noted that demand for oil had climbed sharply but speculated that prices had also been driven higher by concerns about the shortfalls of investment in both crude oil production and refineries.
Natural gas prices have been kept high in the United States, he said, largely because of the limited infrastructure for importing natural gas from overseas. Gas prices, he said, have been "notably higher" in the United States than in other parts of the world.
In the long run, he said, higher energy prices should lead to higher production of oil and natural gas as well as new sources of energy.
"We must remember that the same price signals that are so critical for balancing energy supply and demand in the short run also signal profit opportunities for long-term supply expansion," he said.
*****
Greenspan says higher prices SHOULD lead to higher production. He warns AGAINST efforts to control price.
I agree pretty much. Prices are OVERLY high based on fear of shortfalls, but this is good because it can encourage new production.
The question is how fast new production can be added to meet demands, and what the price will do until that happens. I accept it likely in the short term (<5 years) it may be possible to ramp new production. I'm not convinced it is a good idea to try.
The best thing for us all is for prices to continue to rise steeply for quite a while. Demand must be squashed, whatever the economic costs now. Better a little pain now than more later.
Greenspan doesn't seem worried about inflation, so I won't worry either.
According to Greenspan
****
ASHINGTON, April 5 - Alan Greenspan, chairman of the Federal Reserve, said on Tuesday that oil and natural gas markets were under the heaviest strain in a generation and suggested that prices might remain high for some time.
But Mr. Greenspan was optimistic about the long-run outlook for energy supplies, and he warned against efforts to "distort" or "stifle" prices set in global markets.
Mr. Greenspan was silent about the potential impact of higher oil prices on inflation or economic growth, or on the central bank's monetary policy.
"Markets for oil and natural gas have been subject to a degree of strain over the past year not experienced for a generation," he said in a speech beamed by satellite to petrochemical executives in Texas.
Noting that investment in new production capacity has lagged the growth in demand for oil, particularly from China, Mr. Greenspan said much of the "slack" in world energy markets had disappeared.
...
He noted that demand for oil had climbed sharply but speculated that prices had also been driven higher by concerns about the shortfalls of investment in both crude oil production and refineries.
Natural gas prices have been kept high in the United States, he said, largely because of the limited infrastructure for importing natural gas from overseas. Gas prices, he said, have been "notably higher" in the United States than in other parts of the world.
In the long run, he said, higher energy prices should lead to higher production of oil and natural gas as well as new sources of energy.
"We must remember that the same price signals that are so critical for balancing energy supply and demand in the short run also signal profit opportunities for long-term supply expansion," he said.
*****
Greenspan says higher prices SHOULD lead to higher production. He warns AGAINST efforts to control price.
I agree pretty much. Prices are OVERLY high based on fear of shortfalls, but this is good because it can encourage new production.
The question is how fast new production can be added to meet demands, and what the price will do until that happens. I accept it likely in the short term (<5 years) it may be possible to ramp new production. I'm not convinced it is a good idea to try.
The best thing for us all is for prices to continue to rise steeply for quite a while. Demand must be squashed, whatever the economic costs now. Better a little pain now than more later.
Greenspan doesn't seem worried about inflation, so I won't worry either.
posted by Ares Olympus at 11:59 AM
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