US Sold Nearly 6 Million Barrels of Oil Reserves to China, Records Show
The Biden administration has sold nearly 6 million barrels of oil from the U.S. strategic reserve to an entity tied with the Chinese Communist Party, records show.
From September 2021 to July, the Department of Energy (DOE) has awarded three crude oil contracts with a combined value of roughly $464 million to Unipec America, the U.S. trading arm of Chinese state-owned oil company Sinopec, according to a review by The Epoch Times of the DOE documents. A Chinese firm with ties to Hunter Biden had made an investment in the national oil giant.
The sale would tap 5.9 million barrels in total from the U.S. Strategic Petroleum Reserve (SPR) to export to the Chinese firm. The latest contract was unveiled on July 10, consisting of 950,000 barrels sold for around $113.5 million.
The two most recent sales to Unipec came out of an emergency drawdown of the U.S. oil stockpile, initiated under President Joe Biden on March 31 in what he said would offset the loss of Russian oil in global markets and tame rising fuel costs at home.
But the Unipec contracts have been a subject of heavy criticism since the firm’s connections to the younger Biden came into focus in recent weeks. With Americans nationwide still reeling from the $5 per gallon gas prices in June, the selling of oil reserves to foreign adversaries such as China is at odds with U.S. energy and security needs, Republican lawmakers and analysts have said.
“Biden is draining our strategic reserves at an unprecedented rate. This is an abuse of the SPR, far beyond its intended purpose. Sending U.S. petroleum reserves to foreign adversaries is wrong, and it undermines our national security,” Rep. Clay Higgins (R-La.) told The Epoch Times.
What the United States should do, he argued, is to “unleash American energy production and ensure that our strategic reserves are stocked and able to meet the demands of a national emergency.”
The oil auction is price competitive, and contracts are awarded to the highest bidder. Unipec, a consistent participant in the previous U.S. crude oil sales, secured 1.9 million barrels over the past three months through two contracts it won on April 21 and July 10.
The DOE also sold 4 million barrels to Unipec last fall during a Congressionally-mandated sale.
Sales to Unipec appear to fall in the lower price range among the successful buyers, a review of DOE contracts by The Epoch Times shows. For the 2021 contract, Unipec paid about $63 for each barrel, about seven dollars lower than the trading price at the time, and more than two dollars short of the highest price from other buyers in the sale.
The Strategic Petroleum Reserve is the world’s largest supply of emergency crude oil, with four storage sites in Texas and Louisiana designed to alleviate significant oil supply shortages in times of major geopolitical events or natural disasters.
This oil reserve has seen a steep decline over the past year, more notably since Biden, blaming Russia’s Ukraine war for the “price hike at the pump,” in March ordered an oil withdrawal at a rate of 1 million barrels per day for six months to curb gas prices. The planned sale of about 180 million barrels marked the biggest drawdown in the reserve’s over-four-decade history and is set to cut the U.S. backup oil supply by about a third.
The inventory stood at 474.5 million barrels as of July 22, marking a 34 percent drop from its peak of 726.6 million, and some 90 million lower than the oil level from late March.
The DOE on May 5 announced a “long-term buy back plan” to repurchase 60 million barrels in fall through “a competitive, fixed-price bid process.” The delivery date, the DOE said, will take place “in future years when prices are anticipated to be significantly lower,” likely after the fiscal year 2023. More buybacks would follow after this first tranche of purchases, it added.
But releasing oil reserves at this magnitude carries risks, according to Abhi Rajendran and Robert Johnston, two research scholars on global energy policy at Columbia University. For one, there’s no guarantee that oil prices will fall when the government moves to refill the stock. Further, the diminution of oil supply may cause the market to price in a greater premium for wars and other supply shocks, resulting in higher prices for longer, they said in a Q&A on April 1.
On Capitol Hill, Republican lawmakers have been watching the oil sales with growing alarm.
On July 20, a total of 206 House Republicans voted in support of a legislative amendment aimed at preventing the Biden administration from exporting petroleum to entities with Chinese Communist Party ties.
“It does not make sense that we are using our already depleted energy supplies to help China build up their own strategic reserves,” said Rep. David Valadao (R-Calif.), in a speech rallying support for the proposal.
China is the world’s largest importer of oil. As the West turns away from Russia’s oil due to the Ukraine war, China has been quietly snapping up Russian resources at steep discounts. From March through June, it spent over $25 billion on Russian oil, gas, and coal, nearly doubling the amount from the same period a year earlier, the latest customs data show. The sales volume propelled Russia to become China’s top oil supplier for two straight months from May, displacing Saudi Arabia.
The GOP-led measure was overruled after their 219 Democratic counterparts unanimously voted against it.
The same day, 20 Republican members on the House Committee on Oversight and Reform wrote (pdf) to the Secretary of Energy Jennifer Granholm requesting an immediate briefing and all documents related to the administration’s decision to sell U.S. oil reserves. They noted that the Chinese oil giant Sinopec, the parent organization of Unipec, has been linked to the president’s second son Hunter Biden, through the state-backed Chinese private equity firm BHR Partners, which became a stakeholder of Sinopec in 2014.