A knowledgeable friend of mine was complaining mightily after learning from his reliable sources that more of the U. S.’s oil reserves would be sold to China. He was talking about the 26 million barrels of crude oil, which were released from the Strategic Petroleum Reserve earlier this month. Final bids on this oil are due next Tuesday.
“The ships from China are on their way now,” he said. We all nodded in disbelief that such a thing could be happening, and I came home to do some research.
Even though it’s not a done deal, my friend is probably correct that it will be China, whose need for energy has grown significantly with the end of its unsuccessful Covid lockdown strategy.
According to Reuters, the U. S. Department of Energy considered cancelling the 2023 sale after the Biden Administration last year sold a record 180 million barrels from the reserve, including 5.9 million barrels to Unipec, the trading division of the Chinese state-owned Sinopec. The energy department also sold four million barrels to Unipec in the fall of 2021.
Cancelling the 2023 sale would have required Congress to act. (I pause here to reflect on that unlikely scenario.)
On January 12, the House of Representatives did pass a bill that would ban releases of oil from the strategic reserve from being exported to China. The bill passed 331-97 in the House with all the no votes coming from Democrats. What happened to the bill is unknown (to me) but reports said it would face “an uncertain future in the Senate.” And that was the last I could find on its fate.
I’m scratching my head as to why the Senate would think this was an unreasonable action to take. Doesn’t it feel as though we are nuts – totally crazy – for allowing one drop of oil from our “strategic reserves” to get into the hands of people who send spy balloons our direction? Or who hang out with Russia and Iran and continue to make threatening noises about invading Taiwan?
Through October of last year, U. S oil companies exported nearly 67 million barrels of oil to China. In 2020, when Donald Trump was president, the U. S. exported 176 million barrels to China, Reuters says.
Turns out we don’t control who buys our oil.
When we decide for whatever reason to sell our strategic reserves they go up for auction and then the oil is shipped around the globe to the buyers. Under federal law, the government cannot dictate where oil gets shipped once companies purchase it. That’s how the international oil market works.
When the supply of global crude oil is increased, this eventually helps lower gas prices in the U. S. At least, that’s the theory. I get it, but that doesn’t mean we have to like the fact that we have no control over our precious oil once we decide to sell it.
Then there’s the whole connection between the oil purchaser Sinopec and Hunter Biden, the president’s son, who used to be a member of an equity firm that once purchased a stake in Sinopec. At the time of the oil sale, Hunter was no longer a member of the equity firm and some media outlets reported that “there was no evidence that Sinopec received the oil for any other reason than it submitted one of the highest bids.”
Okay, but it still feels like it’s time to look deep into the black goo and see if we can find answers to some of these sticky questions floating around.