High energy prices can put a strain on both families' and businesses' budgets, but so far they aren't seriously crimping overall economic activity, the president's top economist said Monday.
"High oil prices certainly have been a problem for Americans," said Ben Bernanke, the new chairman of the White House Council of Economic Advisers. "They are a burden on family budgets. They raise costs of production and reduce profits for firms."
Oil prices, which surged to a new closing high of $61.28 a barrel in early July, are hovering above $57 a barrel. Gasoline prices last week set a record of $2.33 a gallon.
"The higher oil prices so far have not depressed economic growth very substantially," Bernanke said. "I think that is a testament to the flexibility and adaptability of the U.S economy that it continues to grow despite this drag from energy prices."
Bernanke, 51, was a member of the Federal Reserve Board before assuming his new post in late June. He is frequently mentioned as a possible successor to Fed Chairman Alan Greenspan, who is expected to step down early next year.
The White House is predicting that gross domestic product will grow by 3.4 percent this year as measured from fourth quarter to fourth quarter. While that would be down from the 3.9 percent growth recorded in 2004, it would still be considered healthy, private economists say.
Although Bernanke said he is impressed by the economy's ability to withstand high oil prices, he said that gyrations in those prices — in either direction — could create uncertainty and pose a possible challenge to the economy's good performance.
Under pressure from soaring gasoline and other energy prices, President George W. Bush has been prodding Congress to send him an energy bill before lawmakers leave for their summer recess in August. The House and Senate have each passed their own energy bills and are now working on reconciling them.
On other issues in remarks to reporters, Bernanke refused to comment on a Chinese company's attempt to take over U.S. oil company Unocal. CNOOC's bid has raised hackles on Capitol Hill, where Democratic and Republican lawmakers are already worried about China's trade and economic relations with the United States.
Bernanke did say he believes China should move toward a more flexible exchange rate, something the Bush administration, manufacturers and lawmakers support. "I'm hopeful that they will move in that direction soon," he said.
He declined to offer an exact time frame when that would happen. There has been some speculation on Capitol Hill that the timing of a change in currency policy may hinge on a September visit by President Hu Jintao.
U.S. manufacturers contend that Beijing's practice of linking its currency to the dollar has undervalued the yuan by as much as 40 percent, making Chinese goods cheaper in America and U.S. products more expensive there. That practice, critics say, has hurt U.S. sales abroad and has contributed to the loss of U.S. factory jobs.
In June, manufacturers cut jobs for the fourth month in a row, shedding 24,000. Most of those cuts came from the automobile industry, swamping employment gains at factories that make computers and electronic products.
Most job growth, though, is coming from other parts of the economy, including services, finance, education and health care, Bernanke said.