White House Weighs Defense Production Act as U.S. Refineries Maxed Out

The White House is weighing the possibility of invoking the Defense Production Act to boost U.S. refining capacity, as refineries are currently operating at near capacity and diesel prices have surged above $6 per gallon. The proposal was raised during a recent meeting between President Donald Trump and several U.S. refiners, though no final decision has been made.

Industry executives have suggested that federal funds could expedite the process by expanding existing plants or boosting refinery efficiency. Constructing a brand new facility would be prohibitively expensive, taking years to complete. The Defense Production Act empowers the president to provide financial aid and direct industrial resources for materials and capacity deemed crucial for national defense.

In April, Trump issued a presidential determination outlining the importance of domestic petroleum production, refining, and logistics to national defense, thereby authorizing actions under Section 303 of the DPA to augment that capacity. Currently, U.S. refineries are operating at approximately 98% capacity since late August, the highest level since 2000.

Refining executives have highlighted the value of the output, as capacity has vanished in Asia, the Middle East, and Russia. U.S. diesel reserves are currently 13% lower than their five-year average, with diesel prices exceeding $6 per gallon due to disruptions in the Middle East and Russia.

One potential avenue is being examined in Texas, where America First Refining plans to build a refinery capable of producing 168,000 barrels per day at the Port of Brownsville, the first new U.S. refinery in nearly five decades. However, it remains uncertain whether the project would be eligible for DPA funding.