A measure in a funding bill introduced to avert a government shutdown includes the prohibition
A new government funding bill includes a measure that would prohibit China from buying oil from the U.S. strategic petroleum reserve. The provision was included in legislation unveiled by congressional leaders Sunday as lawmakers work to avert a government shutdown.
The strategic petroleum reserve (SPR) is an emergency oil stash set up following the 1973 oil crisis. The White House in 2022 announced a record release of 180 million barrels of oil from the SPR in an attempt to rein in energy prices following Russia’s invasion of Ukraine. The idea was to buy back oil at lower prices to refill the SPR, with the dual effect of also spurring domestic oil production. The bet paid off handsomely: By selling high and buying low, the Biden administration’s oil trade netted a $66 million profit.
Among the companies that purchased oil from the SPR during the 2022 drawdown was UNIPEC America. The Texas-based arm of Chinese state-owned oil giant Sinopec bought one million barrels from the reserve. It was not the first time the SPR had sold oil to a Chinese firm. The Trump administration in 2017 sold some stockpiled oil to a subsidiary of state-owned PetroChina.
Critics say sales from the SPR should not benefit China, which the White House views as the nation’s most serious competitor. In January 2023, the House passed a bill with language similar to the provision unveiled Sunday barring SPR sales to Chinese government entities. That bill was not taken up by the Senate. At the time, the Chinese state-owned tabloid Global Times denounced the bill as a move to smear and “blacken” China.
Whether limiting sales to China from America’s SPR would meaningfully change the energy security calculus for either country is unclear. Of all oil sold from the SPR between 2017 and February 2023, only 2.5% went to Chinese firms, while 63% of sale volumes went to U.S. firms, according to the Congressional Research Service.
For its part, China been building up its own strategic petroleum reserves with what appear to be well-timed entries into to the market to scoop up cheap oil. Calculations by investor and researcher Alex Turnbull show that China’s stockpile of crude oil has more than doubled since 2020.
“China clearly built this stockpile very aggressively in 2020 when prices were low, backed off imports when prices were high in early-mid 2022 (also when China was in some state of lockdown), opportunistically bought more in Q2 2023 and now seems to be backing off very quickly,” Turnbull wrote in October in his newsletter, Syncretica.
China buys plenty of U.S. liquified natural gas (LNG), through long-term contracts with major suppliers as well as purchases on the spot market. But Beijing is reportedly discouraging state-owned energy majors from signing more LNG deals in the U.S., over concerns of mounting geopolitical tensions.
Meanwhile, two Democratic senators last week introduced legislation that would indefinitely ban exports of U.S. oil and liquified natural gas to China. Whether or not that bill gains traction, energy — both renewable and fossil fuel-based — will be a highly contested domain in U.S.-China relations.
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