Washington – The sharp spike in energy prices that occurred after the Gulf Coast hurricanes will act as a drag on the economy, although the effect on growth and inflation will not be as severe as the oil shocks of the 1970s, Federal Reserve Chairman Alan Greenspan said today.
Greenspan said that with world oil markets tight because of rising global demand, the likelihood of a sizable spike in prices because of the loss of Gulf Coast production was “an accident waiting to happen.”
“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,” he said in a speech to Japanese business executives in Tokyo.
Greenspan said the hurricanes’ effect on the economy would have been worse had it not been for strides made by the United States and other countries in becoming more energy-efficient.
He predicted greater progress in this area as well as a movement toward alternative sources of energy.
