There are two possible explanations for this, neither of which are pleasant. The first is that he is quite simply wrong. There is ample precedent for this: Greenspan was wrong about:
Natural Gas: In May 2003, he warned of potential natural gas shortages and pprice squeezes. Natural gas prices tumbled shortly thereafter;
Crude Oil: July 20, 2004 Congressional testimony that rising energy prices
"should prove short-lived"; crude prices have risen substantially since;
Mortgage Rates: Recall last Summer, when he
praised the virtues of adjustable-rate mortgages when fixed-rate loans
were near half-century lows;
Stocks: Recall his now infamous 1996 irrational exuberance speech — the market rallied for another 4 years. By 2000, he had drank the Kool-aid and was discussing the productivity miracle –just in time to catch the bubble popping;
Job Creation: While he focused on the productivity miracle, the productivity paradox was overlooked. The present anemic Jobs recovery can be traced in part to high productivity.
Notice a pattern yet? This forecasting track record history makes me immediately think "Wrong again."
But let’s not be quite so flippant. What happens if he’s right? (and how might that happen?).
That’s the even worse news. The most obvious way to be bearish on the price of Oil is to anticipate a global economic slowdown. And thats no fun for anybody — Bull or Bear.
(Theoretically, increased prices stimulate additional exploration while dampening demand. But thats too fine a line to walk, while simultaneously anticipating a soft landing).
Greenspan On Oil: Long-Term Bear
Forbes, 04.06.05, 10:20 AM ET