White House Considers Defense Production Act for U.S. Refining

U.S. refinery utilization reached 98% in late August. This marks the longest stretch above 95% since 2000. Diesel prices crossed $6 per gallon this week. The White House is considering the Defense Production Act to add refining capacity. No decision has been made yet.

President Donald Trump discussed the proposal with nearly a dozen U.S. refiners. Refining executives stated that federal funds would yield faster results if used to expand existing plants. Building a new refinery costs billions and takes years. Improving efficiency at current facilities is the preferred path.

Legal Authority for Industrial Expansion

The Defense Production Act grants the president authority to direct industrial resources. It covers materials and capacity deemed necessary for national defense. In April, Trump issued a presidential determination on this topic. The order declared domestic petroleum production essential to national defense. It authorized purchases and financial instruments under Section 303.

This legal framework allows for direct intervention in the energy sector. The administration views refining capacity as a strategic asset. The move aligns with broader goals to secure supply chains. It also responds to global market disruptions.

Global Refining Capacity Decline

U.S. output has become more valuable as global capacity shrinks. Phillips 66 estimated 7 million barrels per day offline in Asia and the Middle East. Another 1.4 million barrels per day are unavailable in Russia. U.S. diesel inventories are 13% below their five-year average. These disruptions squeezed global fuel supplies.

Potential New Facility in Texas

America First Refining plans a 168,000-barrel-per-day refinery in Texas. The project is located at the Port of Brownsville. It was announced in March as the first new U.S. refinery in nearly 50 years. According to OilPrice.com, it remains unclear if the project will receive DPA funding. Discussions on the matter continue.