Is OPEC in crisis? North American unconventional oil supply and the New Era of World Oil.

Daniel Yergin Interview at CNBC, excerpts, identifies the New Era of Oil

Is OPEC in Crisis?

OPEC is not in crisis right now, but it is in discord. Today, there is a real division between those few countries, such as Venezuela, that are pressing for immediate action and the remaining members that are working to determine the catalysts behind the oil price drop and the market dynamics. If we see more price weakness going into the late November meeting, it could be in crisis. Unconventional reserves

Is Saudi Arabia driving prices down?

Saudi Arabia is not driving the decline in oil prices, as some suspect. We have entered a new era of world oil. A decade ago, Chinese economic growth drove the price of oil higher. This new era, in contrast, is defined by the incredible surge in U.S. oil production, which has risen 80% since 2008-an increase that exceeds the output of 11 of the 12 OPEC countries. In addition, slower global economic growth-"the new mediocre in the world economy," as IMF managing director Christine Lagarde terms it-and the unexpected arrival of a million barrels from the state of Libya added to the downward price pressure.Pearsall shale play

Saudi Arabia's ultimate response to weaker oil prices remains to be seen, but it is clear that it will not undertake unilateral production cuts that allow Iraq, Iran, Russia, or others to absorb its market share. The Saudis are indicating they would only agree to real coordinated cuts-an outcome that is still pretty far away. With $768 billion in foreign currency reserves, Saudi Arabia can afford to wait out the price decline, but it is in the Kingdom's interest for the price of oil to rebound.

What would it mean if we were in an era of cheap oil?Tight Sand Tight Gas play

Will the Asian economies feel the benefits of lower oil prices?

In general, lower oil prices act as a global 'tax cut' and will benefit the heavy oil-importing countries, such as China. Ironically, the United States, which has benefited greatly from the unconventional oil and gas revolution will see a more mixed impact, but overall will still enjoy a stimulus to its economy. On balance, cheap oil is a plus for the global economy and might even rescue us from the "new mediocre" in terms of economic growth.

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Dan Yergin is IHS vice chairman.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.