Art,
[Greenspan's] view, if one reads between the lines, is that it's okay to allow crude oil prices to remain around $54 per barrel (and natural gas over $7/mmbtu).
Now, while I'm not a mind reader, I believe Greenspan is looking at energy prices with a long term time horizon.
The longer energy prices stay "high", there is an economic incentive for energy companies to begin to increase their E&P budgets. As these companies continue to invest more money in E&P, additional supply (capacity) will "hit" the market. Eventually, these investment will lead to lower energy prices over the long run.
Additionally, higher energy prices may spur investment in refineries. We can have oil gushing out of the ground, but if refinery capacity is not increased, it does not do anyone any good. I believe that no new refinery capacity in the US(?) has not increased since the 70s.
Regards,
Dave |
