While high energy prices are not holding back the US economic recovery, rising fuel costs almost certainly have some impact and should be lower, US Treasury Secretary John Snow said on Friday. "They're certainly way, way too high and we would hope that they can go back down some," he said in an interview with CBS radio.
"The American economy is so strong and so resilient that it seems to be just blowing through that; the effect, though, is bound to be there - we use energy in so many things it's an important component of consumption, so when the price of energy goes up, it's like a tax that leaves less disposable income for other things," he said.
Snow's comments come as oil prices have risen 18 percent in the last four weeks. US light crude was at $53.47 a barrel on Friday, holding below Thursday's $55.20 peak, the highest price since the contract hit a record $55.67 on Oct. 25.
US economic policy-makers are watching closely for any signs higher energy costs could contribute to rising inflation, but say that so far, there is no evidence of that.
Chicago Federal Reserve Bank President Michael Moskow said on Tuesday solid economic growth has not yet mopped up labour and production overcapacity and oil prices have not posed a problem for underlying inflation.
At the same time, auto group AAA warned US motorists already high gasoline prices could hit record levels over the spring and summer as drivers set out on holiday road trips. Retail US pump prices are now only about 13 cents below the record of last May.
Snow, in New Orleans to promote President George W. Bush's proposal to use private accounts in the Social Security government retirement system, said the US economy is strong and can continue to grow without causing inflation.
"We've been able to move through these much higher energy prices with continuing growth in GDP, with continuing low inflation rates, core inflation rates, and with very significant continuing pickup in employment," he told reporters after speaking to the New Orleans Chamber of Commerce.
To lower energy costs, the US Congress should pass Bush's energy plan allowing more domestic production, Snow said. Congress has delayed action on the energy bill partly because of controversy over a provision allowing oil drilling in Alaska's Arctic National Wildlife Refuge.
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