WASHINGTON — The United States needs to expand the global trade in natural gas as a way to prevent future sharp price increases from harming the economy, Federal Reserve Chairman Alan Greenspan said Tuesday.
Greenspan said a dramatic rise in recent years in the price of oil and gas for delivery six years into the future was almost certain to have an effect on the economy.
But he said the impact was likely to be greater for users of natural gas, because they have no global supply to cushion price increases.
"If North American gas markets are to function with the flexibility exhibited by oil, more extensive access to the vast world reserves of gas is required," Greenspan said in remarks to an energy conference sponsored by the Center for Strategic and International Studies.
Saudi Arabian Oil Minister Ali Naimi, speaking at the same conference, said his country and other members of the Organization of Petroleum Exporting Countries still support a $22 to $28 per barrel target for oil prices despite Venezuela’s recommendation to raise the target by $2 per barrel at OPEC’s September meeting.
"I don’t believe there is a fissure" on the issue inside OPEC, Naimi said. "There is a dialogue, and some member countries expressed their desires."
Greenspan said imports of liquefied natural gas accounted for only 2 percent of the U.S. market last year, in part because environmental and safety concerns have limited the number of U.S. ports with facilities to handle shipments of liquefied natural gas.
But he said that situation could be changing.
"Given notable cost reductions for both liquefaction and transportation of LNG, significant global trade is developing," he said. "And high natural gas prices projected by distant futures prices have made imported gas a more attractive option for us."
Greenspan said the fact that worldwide imports account for 57 percent of global oil consumption, but only 23 percent of natural gas consumption, showed the growth potential for trade in natural gas.
Greenspan said the price of energy contracts for delivery six years into the future have taken a sharp jump upward over the past four years after a decade of "tranquility."
He noted that the price of oil for delivery in six years fell from $20 a barrel just before the first Gulf War to $16 to $19 a barrel in 1999.
Distant futures contracts for natural gas were less than $2 per 1,000 cubic feet of natural gas at the time of the first Gulf War, and had risen only slightly to $2.50 per 1,000 cubic feet by 1999.
But distant futures contracts for oil have risen to more than $27 a barrel, while the price increase for natural gas has been even more noticeable, rising from $3.20 per 1,000 cubic feet in 2001 to almost $5 currently.
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