Friday, May 06, 2005

Rational dis-exuberance in oil consumers.

Oil prices are remaining stubbornly high as traders anticipate the 3rd and 4th quarters.

Alan Greenspan weighs in:

Separately, Greenspan predicted businesses and consumers would conserve more if they believe energy prices will remain high in the years ahead. Such decisions, he said, could "significantly alter the structure of the American economy over the next decade."

For example, businesses would invest in energy-efficient production and equipment and consumers would buy more energy-efficient appliances and cars.

Above quote from this article.

Slightly more in this article:

Regarding oil prices, the Fed chairman said if businesses and consumers decide energy prices will be high over the longer term, they may opt to conserve energy in a manner similar to the period following the 1970s oil price rises. "They presumably will take decisions and actions, especially with respect to investment, that will significantly alter the structure of the American economy over the next decade," he said, citing the potential for fuel-efficient hybrid cars and other energy savings.

"If these circumstances prevail, the ratio of oil and other energy inputs to constant dollar GDP (gross domestic product) will continue to decline as it has since the 1970s," he said.