U.S. Economy 'Up to Challenge' of High Fuel Prices, Fed Chairman Says
Short-term energy prices are likely to remain volatile and high, but market forces will respond with incentives for production and use of new, energy-saving technologies, Federal Reserve Chairman Ben Bernanke said yesterday.
"The days of persistently cheap oil and natural gas are likely behind us," Bernanke told the Economic Club of Chicago. "The good news is that, in the longer run, we have options."
Higher prices "will create incentives for businesses to create new, energy-saving technologies and for energy consumers to adopt them," he said. "The market for alternative fuels is growing rapidly and will help to shift consumption away from petroleum-based fuels."
Government can support conservation "by working to create a regulatory environment that encourages the growth in energy supplies in a manner that is consistent with our nation's environmental and other objectives," Bernanke said. "Given the extraordinary resilience of the U.S. economy, I am confident our nation will be up to this challenge."
Senate Energy and Natural Resources Committee Chairman Pete Domenici (R-N.M.) said most of Bernanke's remarks affirmed the work Congress did in last year's energy bill but added that he intends to do more to ensure greater capacity at oil refineries.
"The House refinery bill has been referred to my committee, and I intend to explore options for encouraging the responsible expansion of our oil refining capacity," Domenici said.
Jack Gerard, president of the American Chemistry Council, paid particular attention to Bernanke's statements on high natural gas prices, which have forced many in the chemical industry to move production offshore.
He noted that the recent 17 percent jump in U.S. natural gas prices over the past two days, due to forecasts of hot summer weather that will hike gas demand for power generation, "confirms the extraordinarily tight supply-demand situation for natural gas."
"In today's market," Gerard added, "even small changes in natural gas supply and demand have a significant impact on the price paid by America's consumers, industries, small businesses, schools and hospitals."
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