President Joe Biden made new use of the nation’s oil stockpile in 2022 with multiple drawdowns intended to reduce retail gasoline prices in the United States, but not all of the barrels sold remained within domestic fuel markets — nor have they in previous administrations.
The Strategic Petroleum Reserve gained new status with Biden’s record-breaking emergency drawdowns, which have helped to drain the SPR by some 40% and ignited criticism from Republicans that spilled over into the new Congress.
News that China was a recipient of some of that SPR crude oil also angered many lawmakers, including Democrats, leading the House to pass legislation Thursday banning the sale and export of oil from the reserve to entities connected to the Chinese Communist Party.
Lawmakers expressed surprise that a foreign adversary could purchase oil from the reserve, but sales and deliveries to foreign entities, including China, did not begin with the Biden administration.
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Here’s more on who can acquire — and who has acquired — oil from the SPR:
How do sales work?
Most, but not all, of the SPR oil drawn down and sold under Biden has been dispensed as a response to the disruptions caused by the war in Ukraine using emergency authorities granted to the president that enable him to order a release after finding a supply emergency exists or may exist.
There are other means of releasing oil from the reserve, including congressionally mandated sales, or sales that Congress directs the Department of Energy to carry out, as well as exchanges.
DOE, which manages the SPR, carries out emergency sales much like it carries out those ordered by Congress: It issues a notice of sale and takes bids.
Oil refiners, commodity traders, and the like may bid on the barrels, and the process is not limited to U.S.-owned and operated companies. DOE also has limited discretion in choosing awardees.
“By law, we are required to select the highest value bid to ensure the best return for taxpayers,” a department spokesperson said.
DOE does not sell or export crude oil from the SPR to countries or entities under U.S. sanctions, however.
Who’s been buying?
U.S.-based companies such as Marathon, Phillips 66, and Valero were awarded contracts across multiple of Biden’s emergency sales in 2022 and have been frequent buyers when DOE opens the reserve.
Foreign-based companies have cashed in, too. Motiva Enterprises LLC, a subsidiary of oil giant Saudi Aramco, has won bids during the Trump and Biden eras. Other companies with foreign parents to take home SPR crude oil in recent years include Macquarie Commodities Trading and Gunvor USA, which have Australian and Cypriot parents.
At least two Chinese-based companies have won awards for SPR oil over the last five years: Unipec America in 2021 and PetroChina International in 2017.
These companies have foreign parents but operate as subsidiaries based in the U.S.
According to DOE, most oil purchased from the SPR remains in the U.S. market, but some shares from Biden’s emergency sales were exported to India, China, and other countries in Europe.
The exports, sent at a time of historically high oil prices affecting buyers around the world, angered many in Congress — especially the exports to China. Multiple bills subsequently introduced in Congress sought to put new restrictions on exports of SPR crude oil.
The newly passed House bill restricting exports to China would be a change for the reserve.
“When Congress lifted the crude oil export ban in 2015, it did not allow the SPR to restrict companies purchasing crude oil from the reserve from exporting those volumes,” the DOE spokesperson said.
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What’s next for the SPR?
The reserve, which is currently authorized to hold up to around 714 million barrels, is around 40% lower than when Biden took office following the emergency drawdowns and other sales.
The DOE issued a solicitation in December for offers to begin refilling the reserve now that oil is trading lower than when the SPR oil was sold, but the department did not accept any of the offers it received, saying that it will “only select bids that meet the required crude specifications and that are at a price that is a good deal for taxpayers.”
DOE wants to buy back in the range of $67-$72 per barrel, but the oil market has been bearish in recent weeks, likely driving respondents to the solicitation to sell at a higher price than the department wants to pay.
