Fed chief plays down new oil shock

NEW YORK - Federal Reserve chairman Alan Greenspan said Friday the US economy is well equipped to absorb the "shock" of high oil prices despite uncertainties going forward.
In a speech to the Economic Club of New York, Greenspan said "the effect of the current surge in oil prices, though noticeable, is likely to prove less consequential to economic growth and inflation than in the 1970s".
The world's biggest oil-consuming nation is now less reliant on oil as a total share of its economy and has become more fuel-efficient since the oil shocks of three decades ago.
"But, obviously, the risk of more-serious negative consequences would intensify if oil prices were to move materially higher," Greenspan added.
Global investment in the refineries needed to convert crude oil into petrol and other products has lagged, leaving supply lagging behind demand especially in energy-hungry China, the US central bank chief said.

05/20/2005 17:53 GMT