White House Weighs Defense Production Act to Expand U.S. Oil Refining Capacity

Why the White House Is Weighing Emergency Powers for Refining

The White House is weighing whether to invoke the Defense Production Act to expand U.S. oil refining capacity as the conflict with Iran exposes the country to global crude supply disruptions and price spikes, two sources familiar with the plans said.

The proposal came up during a recent meeting between President Donald Trump and nearly a dozen U.S. refiners. No final decisions were made, and participants left expecting talks to continue. Refining executives said federal support would be better spent on making existing plants more efficient or expanding current refineries than on financing a new facility, which would be more costly and take years to complete.

The Defense Production Act, described as a tool of last resort that has never been used to add refining capacity, would let the president direct industrial resources and offer financial incentives for production deemed important to national defense. The discussions extend an April presidential determination authorizing DPA use to support U.S. petroleum production, refining and logistics. In a parallel supply move, the administration has secured a 35% U.S. government equity stake in North American Blue Energy Partners, a private Venezuelan oil company holding rights to 17 fields with about 65 billion barrels of proven reserves; the White House says millions of barrels of new Venezuelan production will eventually be processed through U.S. refineries.

The pressure is visible in fuel markets: the national average diesel price has risen above $6 a gallon for the first time, gasoline remains elevated, and U.S. refineries are running near full capacity at 98% utilization. Capacity has also fallen over the past decade as unprofitable plants shut, concentrating refining on the Gulf Coast. A proposed new refinery in Brownsville, Texas, is emerging as a test case, but it is unclear whether that project would receive DPA funding.

Inside the Refining Capacity Debate: DPA Support vs. Industry Reality

Why the Administration Is Reaching for a Last-Resort Tool

The political calendar is a central driver. With diesel above $6 a gallon and gasoline still elevated ahead of the November midterm elections, the White House cannot point to idle refining capacity as a quick fix because utilization is already at 98%. The DPA is attractive because it provides direct financial incentives and industrial-direction powers without new legislation, making it one of the few tools that could be announced and tied to a near-term supply message.

Why Refiners Prefer Upgrades Over a New Plant

The industry's own feedback was that federal money should target efficiency improvements and expansions of existing facilities, not a greenfield refinery. That judgment is consistent with the fact that U.S. refining capacity has declined over the past decade as unprofitable plants shut and the remaining capacity concentrated on the Gulf Coast. In practical terms, debottlenecking an existing site can add barrels faster and at lower capital cost than building from scratch, which is why the industry view matters to how DPA support, if finalized, would be structured.

Brownsville as a Greenfield Test Case

America First Refining plans a 168,000-barrel-per-day facility at the Port of Brownsville, announced in March as the first new U.S. refinery in nearly 50 years and backed by India's Reliance Industries through a 20-year offtake deal. It is unclear whether the project would receive DPA funding. If the administration directs DPA support to Brownsville, it would signal a willingness to override industry caution and finance a long-dated greenfield project. If not, the policy is more likely to align with what refiners actually requested: incremental capacity at existing sites.

The Venezuela Link Adds a Crude-Supply Dimension

The refining-capacity debate is not happening in isolation. The administration's 35% equity stake in North American Blue Energy Partners includes rights to purchase Venezuelan crude, including 20% of the company's output at production cost, and the White House expects millions of barrels of new Venezuelan production to flow to U.S. refineries. That means the broader plan is to pair new or more efficient refining capacity with additional crude supply, although Venezuelan production volumes and timelines remain uncertain.

What Refiners, Fuel Buyers and Project Developers Should Watch Next

Because no final decision has been made and refiners have already signaled where support would be most useful, the practical next steps differ by role.

• Refiners and project developers: Build DPA-related funding requests around efficiency, debottlenecking and expansion of existing plants. The industry's own feedback to the White House was that such projects are more practical than a new refinery, so proposals tied to those improvements are better aligned with current discussions.
• Fuel buyers reliant on Gulf Coast supply: With refinery utilization at 98% and national average diesel above $6 a gallon, there is little spare capacity to absorb an unplanned outage. Quantify exposure to Gulf Coast refinery disruptions in supply contracts rather than assuming market slack will cover shortfalls.
• Investors and lenders to refining projects: Watch whether the Brownsville plant receives DPA funding. A DPA award for that 168,000-barrel-per-day greenfield project would signal the administration is willing to back a new refinery despite industry caution, while a decision to focus elsewhere would point to lower-cost expansion at existing sites.
• Government affairs and policy teams: The administration says talks will continue and has not finalized DPA rules or funding. The April presidential determination already provides the legal basis for more support, so engagement should focus on how any DPA support is conditioned, particularly for existing capacity versus greenfield projects.