December 8, 2022

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Why did the United States rely on strategic oil reserves to sell to China?

The Biden administration has sold nearly 6 million barrels of oil taken from the strategic reserve to Unipec America, the US trading arm of the Chinese state oil company Sinopec. Giuseppe Gagliano’s article

The Biden administration sold nearly 6 million barrels of oil taken from the strategic reserve to an entity associated with the Chinese Communist Party.

From September 2021 to July 2022, the Department of Energy (DOE) awarded three crude oil contracts worth approximately $464 million to Unipec America, the US trading arm of Chinese state oil company Sinopec. The total sale is scheduled to reach 5.9 million barrels of strategic reserve (SPR) to be exported to the Chinese company. The most recent contract, revealed on July 10, was for the sale of 950,000 barrels at about $113.5 million.

Unipec’s two most recent sell-offs resulted from an emergency drawdown of US oil stocks, which began under President Joe Biden on March 31 to offset the loss of Russian oil on global markets and to control rising fuel costs at home.

Unipec’s contracts have come under fire in recent weeks, particularly because of the company’s ties to President Biden’s son.

The oil auction is competitive in terms of price, which means that i Contracts are awarded to the highest bidder. Unipec has secured 1.9 million barrels in the past three months through two contracts won on April 21 and July 10.

The Department of Energy also sold 4 million barrels to Unipec last fall during a congressional-mandated sale.

Sales at Unipec seem to fall in the lower price range among buyers. For the 2021 contract, Unipec paid about $63 a barrel, about $7 below the trading price at the time and more than $2 below the top selling price of other buyers.

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The Strategic Petroleum Reserve is the world’s largest emergency crude oil supply, with four storage sites in Texas and Louisiana designed to alleviate significant oil supply shortfalls in times of major geopolitical events or natural disasters.

The amount of oil in the Strategic Petroleum Reserve has seen a sharp decline over the past year, particularly since Biden blamed Russia’s war in Ukraine for “high prices,” In March, it ordered a drawdown of 1 million barrels per day for six months to curb gas prices. The planned sale of about 180 million barrels represents the largest drop in the reserve’s history in more than four decades, and is set to reduce the supply of US oil reserves by about a third.

China is the world’s largest oil importer. With the West turning away from Russian oil due to the war in Ukraine, China has amassed Russian resources at deep cuts. The latest customs data showed that from March to June, it spent more than $25 billion on Russian oil, gas and coal, nearly double the amount from the previous period. The volume of sales has pushed Russia to become China’s largest oil supplier for two consecutive months since May, displacing Saudi Arabia.

On July 20, 20 Republican members of the House Oversight and Reform Committee I wrote to Secretary of Energy Jennifer Granholm Request immediate briefing and all documentation related to the administration’s decision to sell US oil reserves. They note that Sinopec, Unipec’s parent organization, has been linked to President Hunter Biden’s son, through the state-backed Chinese private equity firm BHR Partners, which became a partner in Sinopec in 2014.

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