May 19, 2009 / 4:54 PM / 8 years ago

U.S. Energy Secretary says oil prices rising on economy

WASHINGTON (Reuters) - Energy Secretary Steven Chu said on Tuesday that oil prices may be rising in anticipation of an eventual economic recovery.

"That might be part of the driver. The economy is in very bad shape today, but there is a feeling ... that it's no longer (in) free fall," Chu told reporters following a hearing before the Senate Appropriations Subcommittee on Energy and Water Development.

"One thing is for certain: when the economy picks up, just based on supply and demand, the price will go up," Chu added.

Oil prices were near $60 a barrel on Tuesday afternoon, up from lows around $35 a barrel earlier this year. Crude prices began dropping last fall from historic levels around $147 a barrel as a global recession cut into demand.

Separately, Chu also discussed the climate change bill authored by Representatives Henry Waxman and Edward Markey. The bill, which would institute a system that would cap greenhouse gas emissions, will initially give away the majority of carbon permits to big polluters.

Although the Obama administration has expressed support for auctioning 100 percent of the permits, Chu said the free allowances were a "necessary part of allowing the United States to make this transition from where we are today to a cleaner economy.

"I know that there are some people who say it's not as strong as it should be, but I for one am of a different opinion. I think you've got to get this thing going," Chu said.

Reporting by Ayesha Rascoe; Editing by Christian Wiessner

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