Meanwhile, a colleague attended a Friday town hall held by Joe Kent, a Washington State Republican candidate for Congress, vowing to impeach President Biden. When a participant asked about oil sales, there were worried murmurs from the crowd and no reaction from the contestant.
What is happening here? A fundamental misunderstanding of world oil markets.
It all started with a simple Reuters article released this month, headlined: “Oil from US reserves sent abroad as gasoline prices remain high.” The article noted that government data showed that more than 5 million barrels released from the United States Petroleum Strategic Reserve (PSR) was exported to Europe and Asia in June.
The Biden administration is releasing oil from an emergency crude oil supply, stored in underground salt caverns along the Gulf Coast, which was first created in the 1970s. The presidents have sometimes tapped the reserve to mitigate the disruption of an international event – such as the spike in oil prices caused by sanctions imposed on Russia for its invasion of Ukraine.
Buried in the Reuters article was this paragraph: “Cargoes of SPR crude were also headed to the Netherlands and to a Reliance refinery in India, an industry source said. A third shipment headed to China, another source said.
The next day, the right-wing Washington Free Beacon published an article headlined, “Biden Sold One Million Barrels of US Strategic Petroleum Reserve to China-Owned Gas Giant.” The journalist had unearthed a Press release from the Ministry of Energy published weeks earlier, on April 21, which listed 12 companies that had been awarded contracts to buy the oil after submitting bids.
Sixteen companies had submitted offers and by the lawthe government is required to sell to the highest bidder, with some exceptions, such as sanctioned companies.
Many of the companies that have won contracts are the US trading arms of foreign companies, such as Equinor (Norway), Shell (Netherlands/UK), Atlantic Trading (France), Mercuria (Cyprus), Motiva ( Saudi Arabia) and Unipec (China.) The press release said Unipec, a subsidiary of state-owned Sinopec, received 950,000 barrels of the 30 million barrels released.
Buried in Free Beacon’s history was the fact that Hunter Biden, the president’s son, once had business dealings with Sinopec. Rosemont Seneca Bohai, a private equity firm where Biden was principal, invested in a fund generally known as BHR Partners. In 2015, this fund bought a stake in Sinopec-Marketing, a subsidiary of Sinopec which markets petroleum products. A Hunter Biden lawyer in 2021 says he “no longer holds any interest, direct or indirect,” in BHR, although the Washington Examiner reported in March that Chinese records do not yet show.
Then on Friday, the Federalist, an influential right-wing publication, published an article headlined with a catchy talking point: “Biden sold oil from emergency reserves to Chinese gas giant linked to scandal-ridden son.”
This spurred tweets from Congress. “Hunter is still a business partner with the CCP [Chinese Communist Party] and they buy our oil,” Rep. Marjorie Taylor Greene (R-Ga.) said. tweeted, link to the federalist article. “Can we impeach Joe Biden now???”
You can see how a months-old press release was used to spin the scandal machine. But here is why this outrage is misplaced.
Crude oil is an international commodity. Its price is determined by global supply and demand. The Biden administration is trying to boost oil supply to help bring down prices that have soared as the United States and its allies have tried to stem purchases of Russian energy products.
What matters to the price of oil is how much oil there is – not who has it.
‘Where it goes is essentially unimportant’, oil industry consultant Philip K. Verleger said.
Indeed, every oil industry analyst we contacted was puzzled that the recent sale to China was suddenly controversial.
Matt Smithchief oil analyst for the Americas at kpler, a commodity data company, closely tracks customs data on these crude oil transfers. He said the Biden administration, in earlier SPR statements, had already sold China 2.5 million barrels in October and 1.5 million barrels in November.
“This is not a new development from an RPD perspective or from a raw American perspective,” he said in an interview. “It doesn’t matter whether he stays in the United States or not to influence the world price.”
Smith said about two-thirds of the 30 million barrels announced in April were for Europe, which is trying to wean itself off Russian oil. But oil destined for China or elsewhere can free up other crude for Europe, he said.
“There’s been a lot of buzz lately, but I think it’s nothing at all,” said Robert McNallythe founder and chairman of Rapidan Energy Group who was responsible for international energy policy while on the staff of President George W. Bush’s National Security Council. He noted that the law allows the export of SPR samples.
This is because in 2015, Congress repealed a 40-year-old law which had prevented the export of American crude oil.
“This means the SPR cannot dictate whether or not companies export crude oil from the reserve,” said Energy Ministry press secretary Charisma Troiano. “US companies are allowed to bid on SPR crude oil; The DOE cannot dictate what successful bidders will do with SPR crude oil after delivery. »
Indeed, in practice, once a company acquires crude oil, it can ship it wherever it wants as a private company, the destination being determined by supply and demand. McNally said the oil could be loaded onto a ship bound for China, but the price would change and the ship would be redirected to, say, India. US officials only learn retroactively where the oil is sent after delivery – not when the oil is delivered to the selected bidder.
In 2011, when President Barack Obama ordered the release of 60 million barrels to ease oil supply disruptions caused by the Libyan civil war, the oil was purchased by US subsidiaries of companies based in Singapore, the Netherlands Low and in Great Britain in addition to the United States. “Prior to the lifting of the rough export ban in 2015, it was unlikely that any product delivered to the successful bidder would be exported outside of the United States,” Troiano said. Thus, although the US subsidiaries have always been qualified bidders, it is unlikely that any product delivered to the successful bidder was exported outside the United States at the time. Now there are no such restrictions.
The Biden administration has said it will use funds from current sales to buy oil to fill the SPR after prices fall.
“Sen. Grassley’s point here isn’t where the oil goes; it’s where the money goes,” Grassley spokesman Taylor Foy said. When politicians or their families profit from their positions, when that profit comes from the sale of oil at a time when American families are grappling with record or near-record fuel prices, it’s outrageous. noted Grassley, if the information is correct, the son of President Biden is still financially linked to China’s Sinopec and potentially profiting from the sale of oil from our strategic reserve, it’s outrageous. As you probably know, Unipec is a wholly owned subsidiary of Sinopec and one of the 12 companies, out of 16 candidates, to win contracts to purchase oil from the US Strategic Petroleum Reserve. Some of Hunter’s financial interests in China were, and may still be, invested in Sinopec.
This is an example of how simple facts – SPR oil was sold to a subsidiary of a Chinese company and Hunter Biden once had a business relationship with that company – are turned into something nefarious. The contract was awarded to the highest bidders through a competitive bidding process and Hunter Biden was moved several steps away from the Chinese company’s U.S. business arm.
Moreover, there is no reason to be indignant. Oil prices are determined by global supply and demand. The Biden administration is seeking to lower the global price of crude oil by bolstering supply around the world. Selling crude oil to traders, whether based in the United States, Europe or Asia, is part of that effort.
Anyone who suggests the Biden administration is doing something wrong here — instead of following the rules — wins three Pinocchios.
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