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The future of oil and gas after the boom

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What effects will oil have on the global economy?

“If there’s too much oil in the world, we can have low prices for a while. That could be the problem,” Marketplace Sustainability Correspondent Scott Tong says. “There’s a lag in the effect in the oil patch, but each day already brings another announcement of a company cutting back on their drilling because prices are too low.”

If prices stay below $60 a barrel, Goldman Sachs estimates producers could lose a trillion dollars. But Janet Yellen, chair of the Federal Reserve Board, says she thinks low oil prices are a net good for the global economy.

The contrast reflects what a lot of people think  in the short term, it is an absolute economic stimulus. Longer term, there are a lot of questions. If you’re an investor, the financial market is taking a big hit, particularly stocks that are exposed to energy and the bond market. Different parts of the economy could end up feeling the pain.

And, if we look farther into the future, the question of climate change comes up.  There have been demands for a carbon tax, but Tong says: “Cheap oil is basically a carbon subsidy.”

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