Greenspan predicts oil prices drop

Federal Reserve chairman Alan Greenspan says the past year’s rise in the price of oil, gasoline and industrial commodities should prove “transitory”, enabling the Fed to raise interest rates gradually and curb inflation without smothering expansion.

Investors disagree. Futures markets are pricing oil for delivery in 25 months at almost $35 a barrel, up from the $25 that energy analysts were predicting a year ago.

“The prospect that oil prices are likely to remain that much higher worsens the trade-off faced by the Fed and other central banks around the world,” said Stephen Brown, director of energy economics at the Federal Reserve Bank of Dallas.

The expectation for continued high oil prices is heightening the inflation concerns of economists.