Yes, Dr. Greenspan, But What About the Price at the Pump?

This quote was selected from Federal Reserve Chairman Alan Greenspan's speech on energy, given May 20, 2005 before the Economic Club of New York:

But if history is any guide, should higher prices persist, energy use over time will continue to decline relative to gross domestic product (GDP). In the wake of sharply higher prices, the energy intensity of the United States economy has been reduced about half since the early 1970s. Much of that displacement was achieved by 1985. Progress in reducing energy intensity has continued since then, but at a lessened pace.

This more-modest rate of decline in energy intensity should not be surprising, given the generally lower level of real oil prices that prevailed between 1985 and 2000. With real energy prices again on the rise, more-rapid decreases in the intensity of use in the years ahead seem virtually inevitable. As would be expected, long-term demand elasticities have proved noticeably higher than those evident in the short term.

EconOpinion understands, but still would like to know if the price at the pump will be higher or lower the next time Americans fill up their tanks.

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