The US economy is likely to absorb the effect of high oil prices, Federal Reserve Chairman Alan Greenspan said Friday.

"The effect of the current surge in oil prices, though noticeable, is likely to prove less consequential to economic growth and inflation than in the 1970s," Greenspan said in a speech to the Economic Club of New York. A copy of the speech was distributed in Washington.

"Today, despite its recent surge, the average price of crude oil in real terms is still only three-quarters of the price peak of February 1981," the Fed chief said.

In the wake of sharply higher prices, said Greenspan, the energy intensity of the US 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.

Meanwhile, he said that "Obviously, the risk of more-serious negative consequences would intensify if oil prices were to move materially higher."

But he also said that it should be market forces that helps stabilize prices. Any response by policy-makers should not "distort or stifle the meaningful functioning of our markets," he said.

Source: Xinhua