Greenspan: A Booming Oil Market “Forever”

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All the economic news was bad this morning. Alan Greenspan said economic growth in the US had gone to zero and was likely to move negative soon. And, the Association for Business Economics survey of economists showed 45% think the US economy will go into recession.

Mr. Greenspan and the economist group seem to be stating the obvious. Falling home prices, declining consumer credit quality and high commodities prices have almost insured that a recession is already under way.

There was something more troubling in Greenspan’s comments. He stated that a boom in oil prices, which hit a record of $101.32 on Wednesday, will "go on forever". Oil rose toward $100 again as Turkey moved troops into Iraq.

Greenspan’s view of supply and demand in oil is sobering. For him to believe that oil prices will stay high he has to be forecasting that demand in emerging economies like India and China will not slow. His views may also indicate that he believes that the world supply of available oil has peaked.

Forever is a long time, especially if you own a car company or airline.

Douglas A. McIntyre