US energy secretary: High oil prices could harm US economy

Daily News Egypt
3 Min Read

CAIRO: US Energy Secretary Samuel Bodman warned Wednesday that high oil prices can harm the US economy when they reach $100 a barrel.

“The economy has been able to withstand this big run-up in price, Bodman said. “But I believe the 100 dollar price of oil is going to have an impact. He spoke at a luncheon held by the American Chamber of Commerce in Egypt attended by reporters.

He noted that while the current US economic woes are largely due to the subprime mortgage crisis, “the price of oil as an immediate factor has been a contributor to our problems.

After briefly topping $100, oil has been falling in recent weeks. The front-month Nymex contract traded Wednesday morning at $87.37, down $1.84 for the day on concerns that a slowing US economy would reduce energy demand.

Bodman noted, however, that a new US stimulus package, as well as Tuesday s sharp US Federal Reserve rate cut, could send oil prices back up in the short term.

“The goal of those would be to stimulate the US economy and to encourage economic growth to occur. If that occurs, that would have, I expect, a moderate increase in the price of energy, he said at the end of an eight day trip that has taken him to Jordan, Saudi Arabia, the United Arab Emirates and Qatar.

Jolted by global recession fears, the Federal Reserve slashed interest rates Tuesday and President George W. Bush and leaders of Congress joined in a rare show of cooperation in promising urgent action to pump up the economy with upwards of $150 billion in tax cuts and government spending.

Market meltdowns overnight around the globe and growing anxiety at home stirred lawmakers and the administration toward swift action, possibly within a few weeks. Wall Street plummeted as Tuesday began, following Asian stocks, then warily eased its sell-off after the Fed ordered the biggest cut on record in a key interest rate.

In the course of his trip, Bodman said he asked major oil producing countries to raise output because of the harm prices were doing to world economies.

“Higher oil prices are having a significant effect on the US economy, but they are having an even more profound effect on the developing nations, he said.

Still, he maintained that the US economy was not in a recession and there were no plans to offset the high price of oil by dipping into the country s National Strategic Reserve.

“That is not something we re contemplating, he said.

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