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

Key Points:

• The White House is considering invoking the Defense Production Act (DPA) to expand U.S. refining capacity amid refineries operating at 98% capacity and diesel prices surpassing $6 per gallon.
• Discussions followed President Trump’s meeting with U.S. refiners, where executives suggested federal funds would be more effective if used to expand or improve existing refineries rather than build new ones, which are costly and time-consuming.
• The DPA grants the president authority to provide financial aid and direct resources toward materials and capacity deemed vital for national defense, with Trump previously declaring domestic petroleum refining essential to national security.
• U.S. refinery utilization has been at historically high levels, while global refining capacity has declined due to offline plants in Asia, the Middle East, and Russia, contributing to tight diesel inventories and rising prices.
• A potential test case for DPA funding is America First Refining’s planned 168,000-bpd refinery in Texas, the first new U.S. refinery in nearly 50 years, though it is currently unclear if it will receive such support.