"Higher oil prices will inevitably move vehicle transportation to hybrids," Greenspan told the Senate Foreign Relations Committee yesterday.
Though the world's most famous central banker retired in January, his opinions still are valued by Congress. The Senate panel invited him back to discuss the risks posed to this country by dependence on foreign oil.
Greenspan, known for his fractured syntax and often inscrutable comments, was clear about one thing: Americans' thirst for oil puts the country at the mercy of hostile foreign oil producers. The only hope for change, he said, is to dramatically lower demand for oil by switching to more fuel-efficient vehicles.
Many Americans may not want to switch from their familiar vehicles to new types, especially electric hybrid cars, he said. But he predicted that the need to save gasoline will compel people to change their preferences.
"We have to make a judgment" that cutting fuel use is important, he said.
So far, the doubling of oil prices since late 2003 has had "little consequence" on the U.S. economy, and probably hasn't caused "serious erosion" of economic growth worldwide, Greenspan said.
Still, the most recent data indicate "some impact" is now starting to be felt, he said, and the problem likely will get worse.
"The balance of world oil supply and demand has become so precarious that even small acts of sabotage or local insurrection can have a significant impact on oil prices," he said.
Attacks on oil facilities in Nigeria helped drive up the price of a barrel of oil to a record $75.35 in April. In the 1990s, oil averaged about $20 a barrel.
Greenspan said India's economic growth has not pushed up oil prices much, but surging demand in the United States and China is keeping global supplies extremely tight. Meanwhile, investment in new oil facilities in exporting countries, except Saudi Arabia, has not been great enough to meet rising world oil demand, he said.