US Plans to Stop Oil Sales to China

Written by Camilla Jessen

Mar.04 - 2024 2:21 PM CET

Photo: Shutterstock.com
Photo: Shutterstock.com
A new funding bill designed to prevent a government shutdown might stop China from buying oil from America's emergency oil supply.

Trending Now

This rule is part of a larger bill that lawmakers introduced as they try to keep the government running.

The emergency oil supply, known as the strategic petroleum reserve (SPR), was created after the 1973 oil crisis.

In 2022, the White House decided to release 180 million barrels from this reserve to help lower energy prices after Russia invaded Ukraine. The plan was to sell the oil when prices were high and buy it back when prices dropped, encouraging more oil production in the US. This strategy worked out well, earning the Biden administration a $66 million profit.

In 2022, UNIPEC America, a branch of the Chinese state-owned oil company Sinopec, bought one million barrels from the SPR. This wasn't the first time the US sold oil from the SPR to a Chinese company; a similar sale happened in 2017 under the Trump administration.

Some people argue that the US shouldn't sell oil from the SPR to China, considering China a major competitor.

Earlier in 2023, the House passed a bill with a similar rule to stop sales to Chinese government entities, but the Senate didn't take it up. China's state-owned newspaper, the Global Times, criticized the bill, seeing it as an attempt to tarnish China's image.

Despite these proposed restrictions, it's not clear if stopping sales to China would significantly impact either country's energy security. Between 2017 and early 2023, only 2.5% of oil sold from the SPR went to Chinese companies, while 63% was bought by US firms.

China has been building its own oil reserves, buying oil when prices were low. According to Alex Turnbull, an investor and researcher, China has more than doubled its oil stockpile since 2020.

China also buys a lot of US liquified natural gas (LNG) through long-term contracts and spot market purchases. However, there are reports that Beijing is asking its state-owned companies to avoid new LNG deals with the US due to rising geopolitical tensions.

Recently, two Democratic senators proposed a bill to indefinitely ban US oil and LNG exports to China. As tensions continue, energy resources, both renewable and fossil fuels, will remain a key area of competition between the US and China.

Most Read