Recent news reports present conflicting views on the United States' ranking in world oil production. Some reports say that the United States has become the largest oil producer in the world, surpassing energy-rich countries such as Russia and Saudi Arabia. Other reports recognize the high level of oil production but express doubts that the U.S. has indeed reached first place. Regardless of the United States' actual ranking, the recent and significant boom in U.S. oil production clearly has made the United States an energy powerhouse.
The high level of oil production in the United States has led to an increased focus on exports. Domestic oil producers are seeking export markets, and there are plenty of interested buyers. The European Union, for example, is seeking preferential access to U.S. oil exports in its negotiations with the United States on the Transatlantic Trade and Investment Partnership. U.S. oil producers, however, face a significant barrier to crude oil exports. Since the 1970s, the United States has imposed a ban on exports of crude oil. As explained in the February editions of King & Spalding's Trade and Manufacturing Alert and Energy Newsletter, the debate on ending the ban is intensifying as U.S. oil production increases.
Recent events suggest that the ban may not be as impenetrable as it has been in practice over the past 40 years. In June, two energy companies—Pioneer Natural Resources and Enterprise Products Partners—received rulings from the Bureau of Industry & Security (BIS) at the U.S. Department of Commerce (Commerce) that permit the companies to export "condensate," a very light form of oil. Condensate is an ideal candidate for export from the United States, in large part because production has skyrocketed during the U.S. energy boom. Until now, however, it was unclear whether BIS would approve an application to export condensate. Companies in South Korea and Japan made the first purchases of approved condensate on July 24, 2014, which, according to news reports, represent the first sales of condensate to Asia in at least 40 years.
Despite the fact that Commerce has said that the rulings do not represent a change in policy, the rulings clearly are good news for U.S. energy producers. What impact these rulings will have on the export ban is unclear, but pressure on the crude oil export ban in light of the high level of U.S. oil production is likely to increase.