WASHINGTON, Oct 10 (AFP) - Record-high oil prices are a drag on the US economy, Treasury Secretary John Snow said Sunday, but predicted that prices would ease because current levels were out of line with market fundamentals.
"It is a drag. It's creating headwinds for the otherwise very strong economy. And it acts like a tax, taking disposable income away from people," Snow told CNN.
"The price is above what's justified by the fundamentals of the marketplace. It's out of line with the fundamentals, and there will be a movement back toward the fundamentals, which means a lower price," he said.
Oil prices gushed to new record highs above 53 dollar a barrel Friday in New York, pressured by fears of interrupted supplies from Nigeria and the Gulf of Mexico in a market straining to meet voracious global demand.
Snow said he believed key oil producers in the Middle East were committed to bringing down prices, after meeting with ministers on the sidelines of Group of Seven, International Monetary Fund and World Bank meetings in Washington earlier this month.
"I just left a series of meetings with Middle Eastern finance ministers, where we put on the table the need for expansion of output in quotas. And I must say that we got a very good response on that. And they've indicated that they are committed to bringing the price of oil down," he said.
Although prices are at record highs, adjusted for inflation they remain far below the levels reached in the wake of the 1979 Iranian revolution when prices surged to upwards of 80 dollars a barrel in today's money.