Key facts
- The White House is considering using the Defense Production Act to expand U.S. oil refining capacity.
- The move is driven by concerns over global crude supply disruptions and rising fuel prices.
- President Donald Trump met with U.S. refiners to discuss potential federal support.
- Refiners advised focusing federal funds on efficiency and expansion of existing plants.
- The Defense Production Act has never been used to add refining capacity.
- National average diesel prices have exceeded $6 a gallon, with gasoline prices also elevated.
The White House is exploring the use of the Defense Production Act to increase U.S. oil refining capacity, a move driven by concerns over global crude supply disruptions and rising fuel prices. The administration is under pressure to demonstrate it can contain the impact of surging fuel costs on consumers and businesses ahead of the November midterm elections.
During a recent meeting, White House officials discussed with U.S. refiners how federal support could be best utilized to add capacity. Refining executives suggested that federal funds would be more effectively directed toward improving the efficiency of existing refineries or expanding them, rather than financing entirely new, more costly, and time-consuming projects. The Defense Production Act, a tool of last resort that has never been applied to refining capacity, grants the president broad powers to direct industrial resources and offer financial incentives for production expansion deemed critical for national defense.
This initiative builds upon a presidential determination made in April that authorized the use of the act to support and expand U.S. petroleum production, refining, and logistics. The U.S. is a major global oil refining power, but national average diesel prices have surpassed $6 a gallon for the first time, and gasoline prices remain elevated. U.S. refiners are currently operating at approximately 98% utilization, indicating near-maximum capacity. However, tight global supplies and strong demand continue to drive high fuel prices. Refining capacity in the U.S. has decreased over the last decade due to plant closures.
The White House has increasingly cited the expansion of domestic refining capacity as a response to fuel price spikes linked to the conflict with Iran. This effort serves as both a long-term strategy to mitigate global supply disruptions and a component of the administration's broader response to affordability concerns before the elections. The administration is also working to increase access to foreign oil supplies, having recently secured a 35% U.S. government equity stake in North American Blue Energy Partners, a Venezuelan oil company.
A proposed new refinery in Brownsville, Texas, by America First Refining, is being considered as a test case for expanding U.S. refining capacity. This facility, planned to process 168,000 barrels per day, was announced by President Trump in March as the first new U.S. refinery in nearly 50 years. The project is supported by India's Reliance Industries, which has a 20-year agreement to purchase its output. Donald Trump Jr. is a minority investor in America First Refining, and Cantor Fitzgerald is serving as the company's financial adviser.