Critics, including in the conservative media, attacked President Joe Biden for selling oil from China’s Strategic Petroleum Reserve. Some reports suggest a connection between these sales and Chinese investments by Biden’s son Hunter.
However, international oil market experts have told PolitiFact that the sale is governed by US law and they believe it is unlikely that the Biden family could have influenced or benefited from the sale.
”It’s a political topic and it’s a ridiculous topic,” said Patrick De Haan, vice president of GasBuddy, which tracks gasoline prices.
The US strategic oil reserve began with the OPEC oil embargo in 1973 and 1974, when oil price spikes hit the US economy hard. According to the Congressional Research Service, it is designed to reduce the vulnerability of the United States to power outages.
The reserves amount to more than 700 million barrels and are stored in underground geological formations known as salt domes. The reserve includes four sites, two each in Louisiana and Texas.
Biden has authorized the sale of some crude oil stocks due to supply shortages, especially in the wake of the West’s decision to cut Russian oil supplies following Russia’s invasion of Ukraine. This is done through a lengthy competitive bidding process, with oil being awarded to the highest bidder. (More on this later.)
On April 21, a shipment of 950,000 barrels of oil was sold to the Chinese company Unipec America from Houston. The remaining consignments of oil totaling about 4 million barrels were sold to companies in other countries.
More than two months later, Biden’s critics launched an offensive. Tucker Carlson of Fox News said Biden should be held accountable for the sale.
“Therefore, due to record gas prices in this country and the inability of American citizens who were born, voted and paid taxes here to fill their cars with gasoline, the Biden administration is selling our spare oil to China,” Carlson said on July 6. reserve”. “Isn’t this a criminal offense? This is, of course, a man worthy of impeachment, and for this he should be impeached. “
Georgia Republican Rep. Drew Ferguson tweeted July 7, “Biden smells like sending oil overseas from the US Strategic Petroleum Reserve. With Americans paying record high oil prices, this administration has decided to give our oil to the EU and China.” .”
The conservative Washington Free Beacon quoted Daniel Turner as saying that the sale highlighted “the Biden family’s connection to China.” The article stated that Hunter Biden was linked to Sinopec, the parent company of Unipec. According to the article, “In 2015, a private equity firm co-founded by Hunter Biden acquired a stake in Sinopec Marketing for $1.7 billion.”
Regarding the role of Hunter Biden, his lawyer George Messires issued a statement on October 13, 2019 saying that Hunter Biden will step down from the board of directors of BHR, an investment company operating in China, and will not receive any profit. on its investment or distribution to shareholders. This means that Hunter Biden will not be involved in the sale to Unipec in 2022.
If the US is trying to lower domestic oil prices, experts say, it’s reasonable to wonder why it’s selling oil to foreign companies. But these experts have an unequivocal answer: this is the law, this is how the international oil market works.
De Haan compared the long-term SPR process to “an auction of crude oil on eBay”.
When the government orders the release of oil from the Strategic Petroleum Reserve, “The Department of Energy issues a sale notice warning companies that oil will be available for purchase,” said Hugh Daigle, a professor at the University of Texas. Austin Department of Petroleum and Earth Systems Engineering. “Companies then make competitive bids for oil, and the winning bidder gets the oil and the bid price.” The winning company negotiates with the Department of Energy when and how to own the oil.
Daigle said that sometimes a US refiner could win the bid, in which case the oil would quickly boost US gasoline supplies. But in other cases, he said, foreign companies won tenders. This increases the global supply of crude oil and ultimately helps lower prices in the United States.
“Companies that want to bid for oil must register with the DOE’s Crude Oil Offer Program, and any company authorized to do business with the US government can register,” Daigle said. As long as the company is properly registered, the sale and supply of the company’s oil is not restricted.”
Oil sold to overseas companies typically makes up a small fraction of the oil sold in SPR auctions. AFP estimates showed that of the 30 million barrels released in June 2022, only about 5.35 million barrels were destined for export.
The oil market is working all over the world, especially since the United States lifted the embargo on the export of US-produced crude oil in 2015. This means that changes in global supply and demand are the main driver of falling prices. A decrease in demand or an increase in supply will lead to a decrease in the price.
“The logic behind allowing exports is that oil is pretty much fungible and has global prices,” said Robert McNally, president of Rapidan Energy Group. In the long run, it doesn’t matter where a barrel of oil is refined in Louisiana, China or Italy.”
Clark Williams-Derry, an energy finance analyst at the Institute of Energy Economics and Financial Analysis, said requiring oil to stay in the US is pointless and easy to avoid. He said the American company could buy oil at auctions by selling an equivalent amount of its own reserves to foreign countries.
”It’s not the same physical molecule, but the impact on the US and global markets is basically the same,” Williams-Derry said.
It is also worth noting that companies buying oil from reserves must be able to process it. US refineries are currently operating at their capacity and may be particularly short of capacity for certain types of crude oil offered from reserves.
Williams-Derry said that the creation of an international oil system was not necessarily “natural, inevitable, or morally laudable” because it was “designed primarily for the benefit of oil companies and traders”. But, he added, we have such a system. In this context, the sale of strategic oil reserves to the highest bidder achieved the policy goal of lowering oil prices.
This article was originally published by PolitiFact, a division of the Poynter Institute. Posted here with permission. See source here and other fact checks.
Amid the Rose Leaf cocktails and spicy fepinates, I also realized that the journalism I do matters.
News coverage in Russia this weekend was clear: Twitter is no longer the source it used to be when it comes to breaking news.
In my opinion, those who have doubts about sales should have a better understanding of the system that many of them helped create. If you take the time to read the information from the Federal Research Service, the oil sold is sold in accordance with laws set by the federal government. Someone needs to take Tucker Carlson off the air and put a gun on Ted Cruz.
Post time: Jun-27-2023