Alan Greenspan's Senate Testimony

Former Fed Chair Alan Greenspan returned to Congress yesterday to testify before the Senate Foreign Relations Committee on the impact of energy prices on the economy. His conclusion caught my eye:

The U.S. economy has been able to absorb the huge impact of rising oil prices with little consequence to date because it has become far more flexible over the past three decades owing to deregulation and globalization. Growing protectionism would undermine that flexibility and make our nation increasingly vulnerable to the vagaries of the oil market.

Current oil prices over time should lower to some extent our worrisome dependence on petroleum. Still higher oil prices will inevitably move vehicle transportation to hybrids, and despite the inconvenience, plug-in hybrids. Corn ethanol, though valuable, can play only a limited role, because its ability to displace gasoline is modest at best. But cellulosic ethanol, should it fulfill its promise, would help wean us of our petroleum dependence, as could clean coal and nuclear power. With those developments, oil in the years ahead will remain an important element of our energy future, but it need no longer be the dominant player.

For a copy of Greenspan's testimony, click here.

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