U.S. House passes legislation barring sales of strategic reserve oil to China

U.S. House Republicans wrapped up their first week in the majority Thursday by passing with bipartisan support a bill to prohibit the Energy Department from selling the nation’s stockpile of crude oil to China or affiliated entities.

The bill, written by Energy and Commerce Committee Chairwoman Cathy McMorris Rodgers, a Republican from Washington, would prevent releases from the Strategic Petroleum Reserve to buyers “under the ownership, control, or influence of the Chinese Communist Party.”

It passed, 331-97, with all Republicans and most Democrats in support.

The legislation would only affect sales from the Strategic Petroleum Reserve, a complex of underground salt caverns along the Gulf Coast in Louisiana and Texas that store crude oil to be used in emergencies. 

Under current law, the president can authorize the release of supplies from the reserve. After a presidential declaration, the Department of Energy sells the oil at auction to the highest bidder. The House measure would restrict Chinese companies from being eligible to bid on the release.

Gas price spikes

President Joe Biden has authorized a handful of releases totaling 250 million barrels from the Strategic Petroleum Reserve since early last year in an effort to manage domestic gas prices, which spiked for a variety of reasons in his first two years in office. 

In April 2022, a Chinese company bought almost 1 million barrels. The House Energy and Commerce Committee’s ranking Democrat, Frank Pallone of New Jersey, said Thursday that sales from the reserve accounted for only 2% of China’s purchases of U.S. oil last year.

A broader ban on all sales of U.S. oil — not only from the reserve — to China, Russia, Iran and North Korea would be more effective, Pallone said.

Republicans on the House floor Thursday argued the bill was about correcting President Joe Biden’s broader energy agenda.

“President Biden and the Democrats’ radical rush-to-green agenda is making life unaffordable for people across the country,” McMorris Rodgers, the new chairwoman of the powerful House Energy and Commerce Committee, said. “To cover up his failed policies driving our energy and inflation crisis, President Biden drained our nation’s Strategic Petroleum Reserves at an alarming rate.”

Sales from the reserve to China hurt U.S. energy security while bolstering an adversary, McMorris Rodgers and other House Republicans said.

Pallone said the recent spike in oil prices highlighted how volatile fossil fuel prices could be. Republicans should be more focused on a broader energy transition, he said.

“It also speaks volumes that this is their first energy priority after regaining the House majority,” he said. “Democrats passed the most significant climate law in our nation’s history … But Republicans’ first energy bill this Congress isn’t about investing in the resiliency of our electric grid or making American energy cleaner and cheaper.”

Patrick De Haan, the head of petroleum analysis at Gas Buddy, a service that tracks gas prices, said in an interview China has many other paths to purchasing crude oil. 

The effect of a bill to block certain sales to China would not meaningfully disrupt that country’s supply but would show the global market that the U.S. could alter its normal supply-and-demand factors — which can only make end prices higher, he said.

“Oil is generally going to get where it’s going to go,” De Haan said. “And blocking segments of the market only hurts consumers … It’s a very dangerous thing to do, to start restricting the market.” 

Hunter Biden connection

Republicans roundly criticized Biden’s decisions to release reserve oil last year, saying the president should instead have focused on increasing domestic oil production. 

Republicans’ desire to enact a restriction on China specifically goes back to last summer, when conservative media outlets took notice of an April 24 sale from the reserve to the Unipec America, a U.S. subsidiary of China’s state-owned oil company, Sinopec. 

Some Republicans jumped on a tenuous connection to Hunter Biden, the president’s son, who was a principal in a private equity group that invested in a fund known as BHR Partners. In 2015, BHR Partners invested in Sinopec Marketing, another subsidiary of the state oil company.

“Pres Biden reportedly sold oil fr[om] American reserves to China’s Sinopec which Hunter Biden may still b[e] tied to via his financial ventures in China,” Republican U.S. Sen. Chuck Grassley of Iowa tweeted in July. “If report correct that’s OUTRAGEOUS.”

A lawyer for Hunter Biden told the New York Times in 2021 that Biden no longer has any stake in BHR Partners.

Senate prospects unclear

The House bill faces a tougher road in the Democrat-controlled U.S. Senate, though the wide bipartisan House vote is a positive sign for its chances across the Capitol. 

A spokeswoman for Senate Energy Chairman Joe Manchin III, a Democrat from West Virginia, declined to comment Thursday.

The ranking Republican on the Senate panel, John Barrasso of Wyoming, said in a written statement the Senate should also pass the bill.

“Sales to adversaries from the Strategic Petroleum Reserve (SPR) weaken our energy and national security,” Barrasso said. “President Biden’s dangerous drawdown of the SPR has done just that. I applaud Chair McMorris Rodgers for putting America’s energy security first. Now that the House has acted, the Senate should move to take up legislation to ban such sales.”

A spokesperson for the Energy Department declined to comment this week, instead forwarding news articles reporting the Trump administration also sold SPR oil to China, debunking Hunter Biden’s involvement and explaining the highest bidder system for SPR sales.