In a recent report, Bank of America said that the U.S. has already surpassed Saudi Arabia as the world's biggest oil producer. While some industry watchers say that Bank of America's estimates are generous, even by conservative estimates, the U.S. is inching closer to the top spot. Despite the abundant oil production, however, the U.S. remains reluctant to export.

Surpassing Saudi Arabia
In a report last year, the Paris-based International Energy Agency (IEA) had said that the U.S. will surpass Saudi Arabia as the world's biggest oil producer by 2016. Last month, the IEA said that the U.S. is already the biggest producer of oil and natural gas liquids. Analysts at Bank of America also noted in a recent report that the U.S. has surpassed Saudi Arabia as the world's biggest oil producer.

Francisco Blanch, who heads the bank's commodities research division in New York, said in the report that the American shale revolution has had a transformational effect on the U.S. and global economies in recent years.

Bank of America noted in the report that Saudi oil production stood at 10 million barrels per day. According to the analysts, in the first quarter of 2014, U.S. oil and natural gas liquids production exceeded 11 million barrels per day. However, some industry analysts say that Bank of America is far too generous in its estimates.

The Energy Information Administration (EIA) said in a recent report that the U.S. produced around 8.1 million barrels per day in the first quarter. But even by conservative estimates, the U.S. is now inching closer to Saudi Arabia. More importantly, production in the U.S. is surging.

Oil major BP (NYSE:BP) noted in a recent report that global oil output rose slightly in 2013 due to the largest increase in non-OPEC countries since 2002 and the main contributor to this growth was the U.S. According to BP, U.S. oil production exceeded 10 million barrels per day in 2013, reaching the highest level since 1986. Production rose by more than 1.1 million barrels per day last year, which was the second straight year of above 1 million barrels per day of supply growth. And production growth has continued in 2014, according to BP.

If the U.S. has not surpassed Saudi Arabia, at the current pace of production growth it will do so by 2015. Indeed, the time has come for the U.S. to capitalize fully on its oil bonanza.

Lifting the export ban
The over four-decade long export ban in the U.S. remains in place even as oil production continues to surge. The ban was imposed after the Arab oil embargo caused an oil price shock. However, back then, U.S. production was declining.

In the present environment, keeping the ban in place will do more harm than good. The export ban has already caused a supply glut, which has led to lower WTI prices compared to the global benchmark. Most refineries on the Gulf Coast are not equipped to process the light, sweet crude produced in the U.S. This has led to an oil surplus. However, producers cannot export this surplus. Oil producers such as Continental Resources (NYSE:CLR) have been urging lawmakers to lift the ban and allow exports. If they are allowed, WTI prices would move closer to the global benchmark, enabling producers to fully take advantage of the U.S. oil boom.

The argument against lifting the ban is that more expensive WTI would mean U.S. consumers will have to pay more at the pump. If, however, the ban remains in place and WTI prices continue to trade at a discount to the global benchmark, there will be little incentive for producers to boost production. That would mean the U.S. will have to import more foreign oil at higher prices, which would ultimately push gasoline price higher. 

The Obama administration has looking at the ban and recently, it took a small step in the right direction by allowing Pioneer Natural Resources and Enterprise Products Partners to export very light oil with minimal processing. However, more needs to be done, and with the U.S. now possibly the biggest oil producer, it is the right time to lift the ban.

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Varun Chandan Arora has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.