US President Donald Trump’s administration is considering using the Defense Production Act to increase the capacity of American oil refineries.
Two sources familiar with the administration’s plans told Reuters.
The use of the law was discussed at a recent meeting between Trump and nearly a dozen executives from US refining companies. White House officials sought to understand how federal support could help expand capacity more quickly.
No final decision has yet been made on the funding mechanism. According to the sources, the parties agreed to continue consultations.
Refining executives said that public funds would be better directed towards improving efficiency and expanding existing facilities, rather than building new plants. Constructing a new refinery requires far more money and can take years.
The Defense Production Act is regarded as a tool of last resort. It has never previously been used to increase refining capacity. The law gives the president authority to direct industrial resources and provide financial incentives to companies to ramp up production of strategically important goods.
In April, Trump had already signed an executive order allowing the law to be used to support and expand oil extraction, processing and transportation capacity in the United States.
At the same time, US refineries are already operating close to maximum utilisation—around 98%. Meanwhile, the average price of diesel in the country has exceeded $6 per gallon for the first time, and petrol also remains expensive.
“America’s oil refining capacity is critical to ensuring the United States has uninterrupted access to safe, affordable and reliable energy. Expanding this capacity is a top priority for the president and his energy team,” White House spokeswoman Taylor Rogers said.
She said the administration is considering specific options to increase capacity, including regulatory changes, faster permitting and additional investment.
Over the past decade, US refining capacity has declined due to the closure of unprofitable facilities. At the same time, a significant share of the country’s capacity is concentrated along the Gulf of Mexico coast.
In parallel, the Trump administration is trying to expand US access to foreign oil.
Recently, Trump reached an agreement for the US government to receive a 35% stake in the private Venezuelan oil company North American Blue Energy Partners. The company obtained rights to develop 17 oil fields with roughly 65 billion barrels of proven reserves.
Read alsoThe Trump administration proposes that oil companies invest in Venezuela’s recovery
The deal also provides the US with the right to buy Venezuelan oil, including 20% of the company’s output at cost. The White House says that in future, millions of barrels of Venezuelan oil will be refined at US refineries.
One potential example of expanding US refining is the project for a new refinery in Brownsville, Texas.
America First Refining plans to build a facility at the Port of Brownsville with a capacity of 168,000 barrels per day. In March, Trump called the project the first new refinery in the United States in nearly 50 years.
The project is backed by India’s Reliance Industries, which has signed a 20-year agreement to purchase products from the future plant.
The project has ties to Trump’s family and administration. Donald Trump Jr is a passive minority investor in America First Refining, and the company’s financial adviser is Cantor Fitzgerald, whose founder, Howard Lutnick, is the US Secretary of Commerce.
- As of 11 September, the price of Brent crude had risen to about $107 a barrel amid an escalation in fighting between Yemen’s Houthi militants and forces backed by Saudi Arabia.