South Korean oil company GS Caltex purchased a $40 million shipment of US oil that recently departed Texas. Image: Flcelloguy at the English language Wikipedia.

First US Oil Exports in 40 Years Headed for South Korea


A shipment of US crude oil worth $40 million left a Texas port on July 30th, bound for South Korea - an important US ally and a resource-poor country with an energy-hungry economy. The United States has had a ban on exporting unrefined oil since the 1970s, but exports have resumed thanks to a surge of new oil production entering the market from new extraction methods being practiced in places like Oklahoma, Texas and North Dakota.

South Korea has to import about 97% of its energy resources, due to the fact that it has no oil resources, very limited natural gas resources, and very little coal of any useful quality. With an economy that has grown by leaps and bounds since it began to industrialize in the latter half of the 20th century, Korea is now the ninth-largest consumer of petroleum products in the world. In an effort to compensate for the strain placed on its economy by the high rate of energy consumption, Korea has built up a world class oil refining capacity. It currently has three of the world’s ten largest oil refineries, importing about 2.3 million barrels of crude oil every day, and re-exporting close to half of that quantity as refined products. Most of Korea’s current oil supply has to transit the Strait of Hormuz and the Strait of Malacca, both among the busiest sea lanes in the world and both potentially hazardous choke points. As a result, the opportunity to purchase oil from the US means negotiating with a strong security ally and reducing shipping safety concerns about the supply route. The recent shipment amounted to 400,000 barrels - less than a quarter of Korea’s daily import needs - but as more shale oil is produced in the US, it is possible that American petroleum could eventually account for a substantial share of Korea’s regular imports.

That said, the rate at which US oil will be exported looks likely to remain low for now. Legally, American petroleum producers are able to refine their product and export it in forms like gasoline or kerosene, but crude oil exports have remained restricted for about 40 years. While the laws have not changed, the type of oil currently underway to Korea is known as ultralight, or “oil condensates,” which are collected using new techniques to extract oil from shale formations. The resulting product requires some minimal treatment, and thus can be considered lightly refined, making it eligible for export. It is up to the Department of Commerce to decide whether or not a petroleum product meets the eligibility requirements, and while many companies have applied to be allowed to export, only a few have been granted permission so far.

What is clear is that if the US oil export capacity continues to expand, South Korea is likely to become a significant destination for much of the product. As the seventh-largest two-way trade partner of the United States, Korea’s importance to the US economy will grow even further with the addition of petroleum.