In another huge setback for China, the United States passed an amendment to an annual defense bill on July 21, banning the export of oil from strategic petroleum reserves (SPR) to China. The measure was heavily pushed by Republican Senator Ted Cruz and Democratic Joe Manchin who believe that it will help safeguard national security. It was passed in the Senate with a vote of 85-14.
The amendment comes amid a renewed focus on the country’s emergency stockpile of oil reserves after they stand at 336 million barrels, the lowest in 40 years. This happened after U.S. President Joe Biden announced the sale last year of 180 million barrels from the SPR to tame gasoline prices that spiked after Russia’s war on Ukraine. However, the amendment has yet to become law. The process requires the House and Senate to work out a final bill that must be passed by both chambers and then approved by Biden.
Energy Secretary Jennifer Granholm said earlier this month that the administration might not be able to refill the SPR during President Biden’s current term. So the move comes amid concerns that the Biden administration which had initially vowed to refill the reserves has not acted quickly enough. An important thing to note here is that last year U.S. oil companies sold more than 83 million barrels to China. This year the trend is up with oil exports to China through April totaling more than 76 million barrels. Senator Joe Machin said in a statement on July 21, “China has stockpiled oil and held back refinery production, and while China was stockpiling, one of its state-owned companies purchased over 1.4 million barrels from the United States of America, the people of our great country, from our own stock of reserves. That’s what we’re trying to stop.”
The amendment bars the sale of oil to Russia, North Korea and Iran as well. Ted Cruz went ahead to address the question, ”I have been working with Sen. Manchin to prohibit such inexplicably reckless moves in a bipartisan way. We should not be selling our emergency oil reserves to our adversaries.”
Remember, a similar bill was passed in the House in January 2023 that would prohibit the sale of U.S. oil from the reserve to any company controlled by the Communist Party of China and ban the export of any crude oil from the SPR to China. To this, the Energy Department had said, “By law, we are required to select the highest value bid to ensure the best return for taxpayers, and since 2017 the vast majority of oil sold from the reserve is sold to American entities.”
Experts have labelled the ban, a very politically driven move as it would have little but no effect on China’s oil supply due to the minuscule share of U.S. oil in the Chinese market. Data from the General Administration of Customs shows the top five exporters of crude oil to China include Russia and Saudi Arabia, Iraq, the United Arab Emirates and Malaysia, while the U.S. lags far behind in tenth place. What it could actually do is cast a shadow over China-US trade relations, which have already been clouded by various export restriction policies, ranging from chips to technology, imposed by the U.S. in recent years.