Federal Reserve Chairman Thinks High Gas Prices Are Here To Stay

Federal Reserve Chairman Ben Bernanke told congress today that he expects the economy to stay sluggish, and was extremely pessimistic about the price of oil in the future. Despite the the airline industry’s open letter to consumers claiming that speculators are driving up the price of oil and causing a commodities bubble, Bernanke doesn’t agree.

From the NYT:

Mr. Bernanke was especially pessimistic about any easing of energy prices, dismissing suggestions that they were being driven by speculation in futures markets. Instead, he said high energy costs reflected the markets’ recognition that demand was outstripping supplies.

“Over the past several years, the world economy has expanded at its fastest pace in decades, leading to substantial increases in the demand for oil,” Mr. Bernanke said. “On the supply side, despite sharp increases in prices, the production of oil has risen only slightly in the past few years.”

Before Mr. Bernanke’s remarks, the Labor Department reported that wholesale prices rose 1.8 percent in June, making for the fastest 12-month inflation rate in more than a quarter century.

Economy Will Stay Sluggish, Bernanke Tells Congress
(AP Photo/Susan Walsh)