Nov. 7 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said rising oil prices will lead businesses and consumers around the world to consume less fossil fuel and increase their use of alternative energy sources.

``The sooner we get the higher prices, the quicker the world economy will accommodate,'' Greenspan told a conference of executives in Sao Paulo, Brazil, via satellite. ``They can be a remedy for high oil consumption, which can result in less and less dependence.''

Crude oil today rose above $98 a barrel in New York for the first time, as the U.S. dollar fell to a record low against the euro. Greenspan said the price increases are driven in part by a recent ``explosion'' of growth in developing countries and a push by oil-producing nations to keep the cost of oil high to boost revenue. Oil has gained 68 percent this year.

``There is increasing awareness that oil politics are not in the interests of the majority'' of the world economy, Greenspan said.

He said several state-controlled oil companies around the world, which control most of the world's proven oil reserves, aren't reinvesting a greater part of their surging income into exploration and new projects. He didn't name any such companies or countries.

Crude oil for December delivery rose 6 cents, or 0.06 percent, to $96.76 a barrel at 12:29 p.m. on the New York Mercantile Exchange. Futures climbed to $98.62 earlier today, the highest intraday price since trading began in 1983.

Greenspan praised the efforts of countries such as Brazil to offer the world different fuels such as ethanol extracted from sugarcane.

Corn-Based Ethanol

He said an effort by the U.S. government to encourage production of corn-based fuels is a ``mistake,'' in part because it has contributed to higher food prices.

Brazil is expected to generate 15 percent of its electricity from sugarcane by 2015, from 3 percent now, helping to alleviate an expected energy shortage, Marcos Sawaya Jank, the head of the Brazilian Sugar and Ethanol Industry Association, said in an interview in Amsterdam today.

``The ethanol thing is real,'' Greenspan said, adding that demand for natural gas, coal and other fuels is growing in certain parts of the world, mainly in developing economies such as China.

Greenspan, 81, also reiterated remarks made in late October that he predicts a ``less than 50-50'' probability of a U.S. recession, saying the country will probably avoid such an outcome amid a plunge in the value of homes. Home prices in the world's largest economy haven't bottomed out, he said.

Mortgage Crisis

The effects of the ongoing subprime mortgage crisis, or the aftermath of massive defaults by U.S. mortgagors with the worst or even no credit history, may be felt in Europe and Canada, and in Japan ``indirectly,'' he said.

The rising cost of credit in the American economy has been ``very dramatic,'' Greenspan said. Greenspan told the audience that more defaults in the subprime mortgage industry may loom, as investors demand higher prices for riskier assets.

Since retiring from the Fed in January 2006 after leading the central bank for 18 years, Greenspan has given paid talks to audiences around the world and his book, ``The Age of Turbulence,'' became a bestseller when it was published last month.

To contact the reporter on this story: Guillermo Parra-Bernal in Sao Paulo at gparra@bloomberg.net.

Last Updated: November 7, 2007 12:35 EST