thereafter, in large part reflecting rapidly escalating health expenditures and the aging of the population. this dynamic is clearly unsustainable. at best, rapidly rising levels of debt will lead to reduced rates of capital formation, slower economic growth, and increased foreign indebtedness. at worst, they will provoke a fiscal crisis that could have severe consequences for the economy. to avoid such outcomes, fiscal policy must be placed on a sustainable path that eventually results in a stable or declining ratio of federal debt to gdp. even as fiscal policymakers address the urgent issue of fiscal sustainability, a second objective should be to avoid unnecessarily impeding the current economic recovery. indeed, a severe tightening of fiscal policy at the beginning of next year that is built into current law – the so - called fiscal cliff – would, if allowed to occur, pose a significant threat to the recovery. moreover, uncertainty about the resolution of these fiscal issues could itself undermine business and household confidence. fortunately, avoiding the fiscal cliff and achieving long - term fiscal sustainability are fully compatible and mutually reinforcing objectives. preventing a sudden and severe contraction in fiscal policy will support the transition back to full employment, which should aid long - term fiscal sustainability. at the same time, a credible fiscal plan to put the federal budget on a longer - run sustainable path could help keep longer - term interest rates low and improve household and business confidence, thereby supporting improved economic performance today. a third objective for fiscal policy is to promote a stronger economy in the medium and long term through the careful design of tax policies and spending programs. to the fullest extent possible, federal tax and spending policies should increase incentives to work and save, encourage investments in workforce skills, stimulate private capital formation, promote research and development, and provide necessary public infrastructure. although we cannot this projection is the alternative fiscal scenario in the congressional budget office ( 2012 ), updated budget projections : fiscal years 2012 to 2022 ( washington : cbo, march ). bis central bankers ’ speeches expect our economy to grow its way out of federal budget imbalances without significant adjustment in fiscal policies, a more productive economy will ease the tradeoffs faced by fiscal policymakers. thank you. i would be glad to take your questions. bis central bankers ’ speeches

or restricted. unless those policies are changed, a greater proportion of the cash flow of producing countries will be needed for oil reinvestment if capacity is to keep up with projected world demand. concerns about potential shortfalls in investment certainly have contributed to current record - high long - term futures prices. to be sure, world oil supplies and productive capacity continue to expand. major advances in recovery rates from existing reservoirs have enhanced proved reserves despite ever - fewer new discoveries of major oil fields. but investment to convert reserves to productive capacity has fallen short of the levels required to match unexpected recent gains in demand, especially gains in china. besides feared shortfalls in crude oil capacity, the status of world refining capacity has become worrisome as well. of special concern is the need to add adequate coking and desulphurization capacity to convert the average gravity and sulphur content of the world's crude oil to the lighter and sweeter needs of product markets, which are increasingly dominated by transportation fuels that must meet ever - more stringent environmental requirements. * * * u. s. natural gas prices have historically displayed greater volatility than prices of crude oil, doubtless reflecting, in part, the less - advanced development of price - damping global trade in natural gas. over the past few years, notwithstanding markedly higher drilling activity, the u. s. natural gas industry has been unable to noticeably expand production, or to increase imports from canada. significant pressure on prices ensued. north america's limited capacity to import liquefied natural gas ( lng ) has effectively restricted our access to the world's abundant gas supplies. because international trade in natural gas has been insufficient to equalize prices across markets, u. s. natural gas prices since late 2002 have been notably higher, on average, than prices abroad, thereby putting significant segments of the north american gas - using industry in a weakened competitive position. indeed, ammonia and fertilizer plants in the united states have been particularly hard hit as the costs of domestic feedstocks have risen relative to those abroad. the difficulties associated with inadequate domestic supplies will eventually be resolved as consumers and producers react to the signals provided by market prices. indeed, the process is already under way. as a result of substantial cost reductions for liquefaction and transportation of lng, significant global trade in natural gas is developing. this activity has accelerated sharply over the past few years as profitable arbitrage has emerged in natural gas prices across international