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What I don't understand is why we're selling oil from the Strategic Reserve to China. I've asked people in the oil business and even they're perplexed. If we'

• Bud 4y ago
  • connicpu 4y ago
    Koch brother* there's only one left now
    • peterpost2 4y ago
      • zapdrive 4y ago
        • TylerE 4y ago
  • krona 4y ago
    https://www.reuters.com/business/energy/oil-us-reserves-head-overseas-gasoline-prices-stay-high-2022-07-05/ https://www.reuters.com/business/energy/oil-us-reserves-head... 950,000 barrels sold directly to Unipec (formally Sinopec): https://www.energy.gov/articles/doe-announces-sales-strategic-petroleum-reserve-combat-putins-price-hike https://www.energy.gov/articles/doe-announces-sales-strategi...
    • thrdbndndn 4y ago
      So about 3.17% of the total sales (30m) went to Sinopec's American subsidiary, and a lot more sold to European companies. I honestly don't see any problem of it.
      • krona 4y ago
        There are many problems. First and foremost, the strategic oil reserve was designed to make the US more resilient to a 1973-style oil embargo. Whatever is going on in the US right now pales in comparison; the drawdown is simply a political ploy, a superficial appeasement, bread and circuses. The sale of the oil to offshore refineries of a strategic enemy proves this, does it not?
        • jonnybgood 4y ago
          That strategic enemy is overpaying for it. That's why it's going to them.
        • sangnoir 4y ago
          > First and foremost, the strategic oil reserve was designed to make the US more resilient to a 1973-style oil embargo Unlike 1973, the US is now a net-exporter of oil. Since a meaningful OPEC oil embargo on the US is all but impossible[1] - then it makes sense for the strategic goals to evolve from "avoid shortages" to "stabilize price shocks". > The sale of the oil to offshore refineries of a strategic enemy proves this, does it not? It only means domestic refineries interested in that grade are at capacity, or were able to source it elsewhere for cheaper. China could full well push up the global price when buying from "elsewhere" too. Oil is a single global market, there is no logical way if lowering american crude prices while global prices are high. That will just lead to price arbitration until there's an equilibrium. 1. Simplified by ignoring domestic refiners' & exported crude type mixes
• christkv 4y ago
  Because they want to create a crisis ?
  • rs999gti 4y ago
    The article said the reason for tapping into the reserves was to buy votes before midterms
    • christkv 4y ago
      Sure but then why sell to China and not Europe
      • _heimdall 4y ago
        Selling the reserve for votes is just a play to lowering prices short term. It doesn't really matter who the buy is at that point since the market is so globalized. There's also the potential that selling to China was a nice way to test the waters and see if that impacted Russian sales at all, but the reserve is auctioned off so that may not play a factor at all in the actual sale.
• bamboozled 4y ago
  Because businesses aren't communists, or red, or blue, they just sell stuff to people who want to buy it, and apparently, it's not illegal to sell things to China because freedom?
  • sschueller 4y ago
    That sounds like something Trump would claim if he gets accused of trying to sell nuclear technology.
    • bamboozled 4y ago
      I'm not saying I like it, I just can't imagine what else would be happening, unless...it's a conspiracy.
• fattire 4y ago
  Ana Kasparian examined this right-wing talking point at length: https://www.youtube.com/watch?v=C2zIOMp0RSA https://www.youtube.com/watch?v=C2zIOMp0RSA She addresses additional related misrepresentations from conservative media. One source she cites is here: https://www.factcheck.org/2022/07/u-s-selling-oil-from-the-strategic-petroleum-reserve-to-the-highest-bidding-companies/ https://www.factcheck.org/2022/07/u-s-selling-oil-from-the-s...
  • puffoflogic 4y ago
    I don't understand your point; that factcheck article confirms the accuracy of the statement that the US is selling oil from the strategic reserve to China (among other countries). It provides more context, yes, but it confirms the statement.
    • NLPlatypus 4y ago
      It’s a global oil market. If China wants to overpay, so be it.
      • refurb 4y ago
        What do you mean "overpay"? It's a global market with a spot price?
        • boppo1 4y ago
          Yeah and spot was high.
          • formerkrogemp 4y ago
            If you need vital goods to run your day to day operations, you'll be willing to overpay off it means you don't have to shut everything down even more than you've had to do so already. Your net benefit as China might outweigh the cost, even if you must buy anyways. The alternative is shutting down the economy more than has already occurred.
• Bayart 4y ago
  I'm not even sure oil makes sense to be imported over the Atlantic for us in Europe. We're mostly about LNG.
  • brailsafe 4y ago
    That's where Canada might stand to gain
    • SECProto 4y ago
      Canada might stand to gain on LNG? We have some import terminals but no export terminals[1]. We announced agreement on a project to export hydrogen to Germany [2]. But there are no means for us to export LNG to Europe in the short to medium term (and no one would want it anyway, in the medium to long term. LNG is expensive and emissions intensive, particularly with fugitive emissions [3]). [1] https://www.nrcan.gc.ca/energy/energy-sources-distribution/natural-gas/canadian-lng-projects/5683 https://www.nrcan.gc.ca/energy/energy-sources-distribution/n... [2] https://www.canada.ca/en/natural-resources-canada/news/2022/08/canada-and-germany-sign-agreement-to-enhance-german-energy-security-with-clean-canadian-hydrogen.html https://www.canada.ca/en/natural-resources-canada/news/2022/... [3] https://www.woodmac.com/news/opinion/do-fugitive-emissions-of-methane-make-natural-gas-more-emissions-intensive-than-coal/ https://www.woodmac.com/news/opinion/do-fugitive-emissions-o...
      • brailsafe 4y ago
        That's why I said might, which your 3rd link seems to support
• benj111 4y ago
  It's a global market. Europe needs X barrels, China needs X barrels. If China buys from the us, it isn't buying from Canada and visa versa. Extra supply benefits all buyers whether China or Europe.
  • habibur 4y ago
    This. Interesting to see that I always find the most practical answer at the bottom.
    • TomSwirly 4y ago
      • nathanaldensr 4y ago
        Would you mind clarifying how they are wrong? One plausible reason might be that there are different kinds of oil and refined products, so different buyers aren't actually just buying "oil."
        • ajot 4y ago
          I'm not the person who you asked, but I think his point is with the keyword "unlimited". Fossil fuels are not unlimited, so selling a reserve of a limited asset doesn't seem to be a good strategy.
  • brailsafe 4y ago
    Wouldn't that not be true at all? How would China not be buying from multiple suppliers?
    • guerrilla 4y ago
      No, it's definitely true. Any significant supply put on the market slows prices everywhere. As they said, the market is global.
    • 4y ago
• Rygian 4y ago
  Maybe to force China to lower its dollar reserves?
  • simonh 4y ago
    Oil is traded internationally in dollars anyway. If they bought from the middle east they’d still be paying dollars. It could be part of a back room deal to limit their purchases of Russian oil though.
    • kesor 4y ago
      No, they will not be paying in dollars. Only pay the dollar-equivalent price, but in other currencies. Saudi Arabia is accepting RMB from China for example. https://oilprice.com/Energy/Energy-General/China-And-Russia-Move-To-Disrupt-The-Dollars-Dominance-In-Oil-Markets.html https://oilprice.com/Energy/Energy-General/China-And-Russia-...
      • nl 4y ago
        Yes, but the price is set in dollars and then exchanged to RMB at the rate set on the floating market.
        • 988747 4y ago
          That won't always be the case. Basically, it's all about with whom you trade most. If Saudi Arabia finds themselves in a position where they have 50+% of their imports and export originates in China it will make sense to switch to RMBs to all trades, and the dollar price of oil, or other goods becomes irrelevant. And the Chinese economy is on track to become bigger that American by 2030.
    • spaniard89277 4y ago
      Not anymore. China, Russia and india are exchanging in their own currencies.
• boppo1 4y ago
  We sold it to a us based subsidiary of a chinese company. We sold more to norway in a similar fashion. But ultimately, we just sell to the highest bidder during price spikes, then wait for the price to decline and buy more.
  • Tenoke 4y ago
    That seems like an odd financial speculation to partake in as the government. Why not just buy whatever oil they need for the reserve and then speculate using futures or whatever instruments they like?
    • deleted 4y ago
      [deleted]
    • Retric 4y ago
      Because the entire point of a reserve is to lower peak prices and it doesn’t matter who your selling it too someone inside or outside the country. Global markets respond to global supply and global demand. The other option is to ban exports, but no reason to start there when we have a reserve.
      • polski-g 4y ago
        The point of the reserve is to operate military equipment during an embargo. Not to cover up for poor political choices.
        • orf 4y ago
          Incorrect.
        • Retric 4y ago
          The US is a net oil exporter, it currently has nothing to fear from an embargo let alone insufficient oil for military use.
        • WastingMyTime89 4y ago
• deleted 4y ago
  [deleted]
• nl 4y ago
  Oil is a fungible commodity. Selling it to a different country at the same price would just mean China becomes the next buyer and gets it from the next source at whatever the next price is. And because the other country didn't buy it that price would be cheaper. The whole point is to lower prices, and prices are set globally.
  • PaulHoule 4y ago
    Somewhat. Oil refineries are build to use a certain kind of crude, if you got crude from somewhere else you might have problems. When there was a minor supply shock in the early 2000's some refineries in the US South got the wrong stuff and produced batches of gas that could dissolve the plastic float that indicates your fuel level and people ran out of gas because the fuel gauge would always read full. (I went through a phase of filling the gas every time I went for a drive and it freaked out my wife and my son because they knew that story and thought the gas gauge had failed.)
  • landemva 4y ago
    Physical items have geographic price differences due in part to transportation costs. If the point is to lower worldwide oil prices, the USA government should stockpile oil closer to China. I'm not recommending USA operate a CN Military Oil Reserve.
    • ozzydave 4y ago
      Oil transport is so cheap relative to the product that it’s not really a factor: https://steno.ai/planet-money/breaking-down-the-price-of-gasoline https://steno.ai/planet-money/breaking-down-the-price-of-gas...
• crazygringo 4y ago
  Nobody is perplexed, but this has sadly become a Republican talking point. The facts are here [1]. Key quotes: > However, because the price of gasoline depends largely on the cost of crude oil, which is mostly based on global supply and demand, experts told us that oil sold from the reserve does not need to stay in the U.S. to bring down gasoline prices. > For each sale, the Energy Department announces the type and amount of oil from the four SPR sites that will be auctioned in a competitive bidding process. By law, the contracts are awarded to the companies that make the highest bids, and any company that is registered in the SPR’s Crude Oil Sales Offer Program is eligible to make an offer. > Finley of the Baker Institute said that American refiners have to determine if they can use the reserve oil that will be released. If not, it may be of use abroad. > “Each individual refinery is optimized for its marketplace and is built to run optimally on a certain type of crude oil and to produce a certain mix of gasoline and diesel fuel,” he told us. “And so it may be that the type of oil being offered from the Strategic Petroleum Reserve doesn’t perfectly match what the U.S. refiners are looking for and it might be a better match for the specific requirements of refiners elsewhere.” Kilian made a similar point. “If the oil released is medium sour, for example, a U.S. refiner specializing in light sweet crude would not be interested,” he explained. “There may be spare capacity at a refinery in Europe, however, that specializes in processing medium sour crude, so trade makes sense.” US refineries are already operating essentially at capacity [2] for various reasons. So no matter what, the crude oil that gets released that can't be refined here has to be exported. [1] https://www.factcheck.org/2022/07/u-s-selling-oil-from-the-strategic-petroleum-reserve-to-the-highest-bidding-companies/ https://www.factcheck.org/2022/07/u-s-selling-oil-from-the-s... [2] https://www.marketplace.org/2022/05/23/u-s-oil-refiners-margins-smash-records-but-few-plan-to-build-more-plants/ https://www.marketplace.org/2022/05/23/u-s-oil-refiners-marg...
  • landemva 4y ago
    > US refineries are already operating essentially at capacity A perplexing aspect is why USA provides a strategic reserve to anyone other than USA. If the answer is "tactical price suppression" then let's change the branding of why USA has these reserves. If the reserves are truly strategic, then don't allow export.