Bernanke warns on oil price ‘threat’

By Agence France-Presse
Tuesday, March 1, 2011 11:26 EDT
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WASHINGTON — Federal Reserve chairman Ben Bernanke on Tuesday warned a “sustained” rise in oil prices could threaten US growth and spark dangerous price rises, as he eyed turmoil in Libya.

Bernanke told Congress he believed unrest in the oil-rich Middle East would result in “temporary” and “modest” increase in US prices, but acknowledged greater risks remain.

“The most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in US consumer price inflation.”

“That said, sustained rises in the prices of oil and other commodities would represent a threat both to economic growth and to overall price stability.”

He added there was a particular risk from unrest pushing up expectations about future price rises.

The threat of higher prices could be enough to spook wary US shoppers, who are only reluctantly opening their wallets after the worst recession in a generation.

Bernanke vowed the central bank would “monitor developments closely” and would respond if necessary, to ensure the economic recovery remains on track.

Amid fighting between the Libyan opposition and forces loyal to leader Moamer Kadhafi, Libya’s estimated 1.6 million barrel a day production has slowed to a trickle, sending global oil prices rocketing.

Americans have seen the price of gasoline at the pump rise by an average of 21 cents a gallon in the last week, according to figures from the American Automobile Association.

With much of the global economy still ailing from the financial crisis, many fear sharply higher oil prices could smother the recovery and send many nations spiraling back into recession.

President Barack Obama’s top economic adviser, Austan Goolsbee, said prices were not yet at levels that could hurt the economy deeply.

“We continue to monitor the events of the Middle East and the fuel markets, because high fuel costs do have a negative impact on the economy,” he said.

“Thus far we are not forecasting… that at these levels they would derail the recovery.”

But the price rises bring an extra headache for Benanke.

In a bid to keep the recovery on track, the Federal Reserve is currently pumping $600 billion into the economy.
That has brought criticism that the Fed could be stoking inflation.

Bernanke and his allies insist the Fed has all the tools necessary to unwind their stimulus policies, if and when they need to.

Federal Reserve policy makers, he said, “remain unwaveringly committed to price stability,” he said.

Agence France-Presse
Agence France-Presse
AFP journalists cover wars, conflicts, politics, science, health, the environment, technology, fashion, entertainment, the offbeat, sports and a whole lot more in text, photographs, video, graphics and online.
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  • Anonymous

    Ok Benny, thanks for that inciteful comment. Now go home and count your money like you do every day.
    What a Yawneer!

  • Anonymous

    He should know, he’s part of the scheme.

  • http://pulse.yahoo.com/_QMPOO3PZFN7XV2XZKCGSXXR3WM Joe Somebody

    Yes, trust the Fed.. they can fix everything with their magic bullets.

    Of course, this is also a veiled suggestion to ‘stabilize the middle east’, through war if needed. And, of course, that’s why we’ve been meddling over there for 60+ years.. to keep the profit-engine screaming along for the top 2%. Well, that engine is worn out, it’s breaking, and we have no other means of locomotion in place yet.

  • Anonymous

    Gas has hit $4/gal in in-town Atlanta. At that rate I and many, many other people stop leaving the house, stop eating out, stop buying extra things, stop all sorts of economy-stimulating activities. We’re being price-gouged back into a worse recession. The Democracy in the Middle East has been GREAT for scaremongering the oil markets.

  • Anonymous

    Oh that’s the reason that they will use to explain why the economy is going to fail…it’s the Arubs and their oil, not Wall Street….the price of oil goes up because people are gambling on Wall Street as to what it will be. It hasn’t anything to do with the amount of oil.

    More bullshit