UPDATED: U.S. oil reserve sales to China blocked under new defense legislation

(Bloomberg) – The Senate passed legislation on Thursday that blocks China from purchasing oil from the U.S.’ emergency stockpiles. 

The amendment to the must-pass National Defense Authorization Act comes amid a renewed focus on the country’s Strategic Petroleum Reserve, which stands at a 40-year-low following the Biden administration’s 180 MMbbl drawdown last year to help tame oil prices in the aftermath of Russia’s invasion of Ukraine. The measure, sponsored by West Virginia Democratic Senator Joe Manchin and Senator Ted Cruz, a Texas Republican, needs 60-affirmative votes for adoption.

The legislation is similar to a bill that passed the House in January that would prohibit the sale of U.S. oil from the reserve to any company under the control of the Chinese Communist Party and ban the export of any crude oil from the SPR to China. The Senate version also bars the sale of oil to Russia, North Korea and Iran, according to a Manchin spokeswoman.

The Strategic Petroleum Reserve, created in the aftermath of the Arab oil embargo in the 1970s, currently stands at 346.8 MMbbl. The Biden administration has vowed to refill the reserve, though so far, the pace has been a trickle.

Republicans, who have criticized the release as a ploy to lower gas prices before the midterm election’s last November, have also raised flags about the administration’s use of the emergency stockpiles, alleging the Energy Department transferred 900,000 boe to Unipec America Inc., a subsidiary of Communist Party owned Sinopec Corp. and the recipient of billions of dollars of investment by BHR Partners, a private equity firm where Hunter Biden, the president’s son, was a founding board member.

The White House has said the Energy Department is required by law to sell the SPR oil in a competitive auction to the highest bidder, regardless of whether the bidder is a foreign company. It has also said that the release of oil from the reserve last year was needed to address price spikes caused by the conflict in Ukraine and ensuing supply disruptions.

The annual U.S. defense policy bill is considered as must-pass because it authorizes pay increases as well as compensation for troops in harm’s way and is widely-supported by Republicans.