Greenspan: Oil Pain Is Limited

Record oil prices have taken a clear toll on the U.S. economy but are not likely to inflict the same level of pain as in the 1970s, Federal Reserve Chairman Alan Greenspan said Friday.

“The impact of the current surge in oil prices, though noticeable, is likely to prove less consequential to economic growth and inflation than in the 1970s,” Greenspan said in Washington. “The risk of more serious negative consequences would intensify if oil prices were to move materially higher.”

U.S. crude oil prices initially showed little reaction to Greenspan’s remarks. But in late trading, light crude for November delivery marched to a record-high $55 a barrel before settling at $54.93, up 17 cents for the day. Traders primarily blamed worry over winter heating-oil supplies.

High oil prices can cut into economic growth and boost inflation. The 1970s oil price spike led to a period of so-called stagflation in which consumer prices rose swiftly despite a weak economy.

The price of oil for delivery in December 2010 didn’t rise as much as that of oil for November delivery this year, which Greenspan said suggested “part of the recent rise in spot prices is expected to wash out over the longer run.”

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Reuters and Bloomberg News were used in compiling this report.