Earlier this month, IER posted a blog that said the Department of Energy (DOE) sold China almost 1 million barrels of oil from the U.S. Strategic Petroleum Reserve (SPR). The real number is almost 6 million barrels of which 4 million barrels were sold to China in November 2021—before the Russian invasion of Ukraine—and at a discount to oil sold on the market. In the November sale, oil was sold on average for $63 per barrel, or over eight dollars less than the average price of oil per barrel that month.
In April 2022, the DOE sold 950,000 barrels to Unipec at $103.30 a barrel for a total of about $98 million, according to a DOE report. In July 2022, DOE sold another 950,000 barrels to China for around $119 per barrel for a total of about $113 million, according to the FY22 Emergency Drawdown No. 3A Successful Awards Report. The Biden administration is selling SPR oil to China while China is buying Russian oil at a discount despite sanctions on Russia. China International United Petroleum & Chemical Co., Unipec, chartered at least 10 tankers so far this month to transport Russian oil that is loaded from Kozmino port—a five-fold increase on the number of hired tankers booked for trade a month earlier. China spent $18.9 billion on Russian oil, gas and coal in the three months that ended in May—almost double the amount from a year earlier, according to customs data.
SPR oil is sold to the highest bidder, and some of the businesses entitled to make bids are American subsidiaries of foreign corporations like Unipec, the trading arm of the China Petrochemical Corporation, which is wholly owned by the Chinese government. China purchased that oil from U.S. emergency reserves to bolster its own stockpile for strategic use. China has been buying large quantities of oil for its reserves since the early COVID lockdowns when prices were low due to demand destruction.
Biden ordered the Department of Energy to release a total of about 260 million barrels of oil stored in the SPR over the last eight months. The SPR’s level has fallen to about 485 million barrels of oil, the lowest level since August 1985, according to the Energy Information Administration. The current level is 20 percent lower than its level recorded days prior to Biden’s first release in late November. That is in contrast to President Trump, who in March of 2020, ordered DOE to fill the SPR to its maximum capacity by purchasing 77 million barrels of American-made oil beginning with an initial purchase of 30 million barrels. While former U.S. Presidents saw the need to fill the SPR and keep it full for its intended emergency uses, Biden is showing he cares little for the national security issues related to these sales. Releasing SPR oil goes along with his promise to do away with fossil fuels.
Senators John Kennedy and Ted Cruz introduced the No Emergency Crude Oil to Foreign Adversaries Act. The legislation, if passed, would prevent future SPR sales from going to China, Russia, North Korea or Iran. The No Emergency Crude Oil to Foreign Adversaries Act would:
- Prohibit China, Russia, North Korea and Iran from receiving future SPR exports unless the Secretary of Energy produces a waiver for one of the countries. The Secretary of Energy would only produce a waiver if it was determined that SPR sales abroad would serve America’s national security interests.
- Require the Department of Energy to issue a report to Congress within 180 days after this bill becomes law outlining SPR sales made after Nov. 23, 2021. This report would detail the route oil sales took to their country of destination, who refined the oil and who owns those refinement facilities.
Biden continues to use U.S. oil and gas resources foolishly (SPR) or not at all, as illustrated by his leasing hiatus on federal lands and waters. He could get more U.S. oil production by just promoting investments to develop new fields in the United States by allowing lease sales on public lands and allowing oil and gas pipelines to be built rather than canceling Keystone’s permit or placing more regulatory hurdles on their approval via the Federal Energy Regulatory Commission (FERC). FERC is supposed to be an independent agency but it appears that the Biden administration does not know what that means.
On November 23, 2021, Biden announced that the Department of Energy would accelerate the congressionally-mandated SPR release of 18 million barrels of oil and release an additional 32 million barrels. At that time, the oil price was $76.75 a barrel and the gasoline price was $3.40 per gallon—43 percent higher than when Biden took office.
On March 1, 2022, Biden announced a second SPR release of 30 million barrels. The oil price was $95.72 a barrel on February 28 and increased to $103.41 per barrel on March 1 and $123.70 a barrel on March 8—the highest oil price since the 2008 recession. The average price of gasoline increased from $3.61 a gallon on February 28 to $4.10 per gallon a week later—72 percent higher than when Biden took office. The gasoline price has not dipped below $4 a gallon since the March 1 release.
On March 31, 2022, Biden announced the largest SPR release to date, ordering the Department of Energy to release 180 million barrels of oil from the SPR between April and September. Biden predicted it would lower gasoline prices by 10 to 35 cents per gallon. The price of oil was $107.82 a barrel on March 30 and while it dropped a bit on March 31, remaining around $100 per barrel through April, it increased to $114.20 per barrel on May 16. In mid-May, gasoline prices hit multiple all-time highs and the price was $4.62 a gallon on May 31—the day after Memorial Day.
Due to demand destruction and China’s lockdowns because of its zero COVID policy, oil prices are now in the low $100 per barrel and gasoline prices in the United States as of July 19, 2022 average $4.495 per gallon–42 percent higher than a year ago and 89 percent higher than when Biden took office on January 20, 2021.
President Biden is hurting U.S. national security by selling SPR oil to China, who is adding those sales to its strategic reserves. Biden keeps thinking that his SPR sales are lowering gasoline prices, but after each announcement, prices went up. The current decline in gasoline prices is due to demand destruction and China’s lockdowns because of its zero COVID policy. If Biden truly wanted oil and gasoline prices to be lower he would offer legitimate lease sales on public lands and have his administration approve pipelines that are critically needed to get oil and natural gas to users. While on the campaign trail, Biden said that he wanted to end America’s use of conventional energy such as coal, oil, and natural gas. And he is doing a good job of promoting policies and regulations that will do just that.