White House: Gas costs to rise further

WASHINGTON (Reuters) – White House economic adviser Ben
Bernanke said on Thursday U.S. gasoline prices will likely rise
further because of system disruptions following Hurricane
Katrina, but will drop when supply lines return to normal.

“There is a supply problem; there’s been a reduction in the
amount of gasoline available. People still want to drive, so
the price is going to go up,” Bernanke, chairman of President
George W. Bush’s Council of Economic Advisers, said on C-SPAN
television.

“I think the good news is that this is not likely to be a
permanent situation as these refineries and these
transportation networks are brought back on line,” he said.

Gas prices should then return to levels seen earlier this
year, Bernanke said. Gas prices were already high before the
storm because of soaring global demand for oil, he said.

Meanwhile, oil prices have moved relatively little in the
past week as a result of the hurricane, because the global
supply and demand for oil was not much affected, Bernanke said.

“The amount of speculative activity is not that great and
I’m fairly convinced that what’s happening to prices is not
much to do, or anything to do, with speculation. What it has to
do with primarily is just the fundamental facts of supply and
demand,” he said in response to a viewer question.

Bernanke said there is not that much the United States can
do about escalating global demand for energy except develop
alternative sources of fuel.

“Higher oil prices, higher energy prices, make these
alternatives economic,” he said.