WASHINGTON (AP) – High oil and natural gas prices have put energy markets under the greatest strain in a generation, Federal Reserve Chairman Alan Greenspan said Tuesday, but he warned against interfering with market forces he hoped would stabilize prices.

Greenspan expressed a hope that higher prices would spur conservation by businesses and consumers and greater energy exploration by energy companies. That should help get prices under control, he said.

In prepared remarks for an energy conference, he said policy-makers should avoid any action that would “distort or stifle the meaningful functioning of our markets.”

Greenspan spoke via satellite to the National Petrochemical and Refiners Association meeting in San Antonio, Texas. A copy of his remarks was distributed in Washington.

On Wall Street, Greenspan’s comments helped give stocks a lift. The Dow Jones industrials gained 37.32 points to close at 10,458.46.

“We must remember that the same price signals that are so critical for balancing energy supply and demand in the short run also signal profit opportunities for long-term supply expansion,” Greenspan said, in urging that market forces be allowed to take care of the problem.

The Bush administration has been pushing Congress to enact energy legislation. Lawmakers in the House are working on a bill with the aim of promoting increased production of a broad range of energy sources – from coal to natural gas. The measure is not expected to have much impact on the price spikes seen in recent weeks, however.

Congress has been trying for five years to enact broad energy legislation. A compromise on a bill fell apart in 2003 in a dispute over liability protection for manufacturers of a gasoline additive and concern about the bill’s $31 billion price tag.

Greenspan also said that the higher energy prices will not only stimulate new exploration but also research and development “that will unlock new approaches to energy production and use that we can now only scarcely envision.”

Oil prices closed at a new, all-time high last week of $57.27 a barrel. They briefly surged past $58.28 a barrel on Monday, then retreated somewhat. They dropped sharply Tuesday in part on Greenspan’s comments and closed at $56.04 a barrel.

“Markets for oil and natural gas have been subject to a degree of strain over the past year not experienced for a generation,” Greenspan said. Strong demand and lags in boosting production capacity were factors in the price increases, he said.

Higher prices oil prices in recent months have slowed the growth of demand, “but only modestly,” Greenspan noted.

Economists viewed Greenspan’s remarks as optimistic about the energy situation. “The bottom line: It was a hopeful, upbeat talk,” said Mark Zandi, chief economist at Economy.com. “Prices look bleak now but ultimately they will elicit a response by both consumers and suppliers of energy.”

Greenspan, in his prepared remarks, did not talk about the future course of interest rate policy in the United States. The Federal Reserve has boosted short term interest rates seven times since last June to keep inflation in check. Economists are expecting another increase on May 3, the Fed’s next scheduled meeting.

In a speech last October, Greenspan said that the surge in energy prices should not be enough to push the country into a recession.

At the time of those remarks, oil was trading for around $55 a barrel – slightly lower than current prices.

Greenspan on Tuesday said it was critically important that America’s 200 million automobiles – which he noted consume 11 percent of total world oil production – become more fuel efficient.

He also said that the resolution of “current, major geopolitical uncertainties will materially affect oil prices in the years ahead.”