Trump Administration Weighs Defense Production Act for Refining Capacity Boost
The White House is exploring ways to use the Defense Production Act to increase US oil refining capacity in response to fuel price spikes and global supply disruptions. According to sources, this move is driven by the administration's efforts to contain the impact of rising fuel costs on consumers and businesses ahead of the November midterm elections.
During a recent meeting with nearly a dozen US refiners, White House officials discussed how federal support could be used to add capacity. However, refining executives advised against building entirely new refineries, citing high costs and long construction times.
The Defense Production Act, which has never been used for this purpose, grants the President broad powers to direct industrial resources and provide financial incentives for expanding production of materials deemed important to national defense. The administration's efforts follow a presidential determination issued in April authorizing the use of the act to support US petroleum production, refining, and logistics capacity.
US refiners are already running at near-full capacity, with utilization reaching 98%. The high utilization underscores the challenge facing the administration: despite producing at maximum levels, tight global supplies and strong demand are keeping fuel prices high. In recent weeks, the White House has emphasized expanding domestic refining capacity as a way to buffer against global supply disruptions.
The administration is also pushing to increase access to foreign oil supplies, including securing a 35% US government equity stake in North American Blue Energy Partners, a private Venezuelan oil company with significant proven reserves. The deal allows the US government to purchase Venezuelan crude, including 20% of the company's output at production cost.
A proposed new refinery in Brownsville, Texas, has emerged as a test case for Trump's call to expand US refining capacity. However, it remains unclear whether this project would receive any Defense Production Act funding.