Trump administration weighs Defense Production Act to boost US oil refining

The White House is considering invoking the Defense Production Act to increase oil refining capacity in the United States, in an effort to strengthen the country’s ability to manage global crude supply disruptions and rising fuel prices, according to two sources familiar with the plans who spoke to Reuters.

The sources said the idea was raised during a recent meeting between President Donald Trump and about a dozen US refining executives, where White House officials discussed ways to use federal support to expand refinery output.

No final decision has been made by the US administration on whether to use the law, and participants expect discussions on available options to continue.

The sources added that refinery executives suggested federal funding should be directed toward upgrading existing refineries or expanding current facilities, rather than building new plants, due to the high costs and lengthy timelines associated with new construction.

The Defense Production Act, an extraordinary tool that has never before been used to increase refining capacity, grants the US president broad authority to direct industrial resources and provide financial incentives to companies to expand production of materials deemed vital to national defense.

These discussions follow a presidential order issued in April authorizing the use of the act to support and expand US oil production, refining capacity, and related logistics.

US refineries are currently operating near maximum capacity, with utilization rates at 98% according to the latest data. Meanwhile, the national average price of diesel has surpassed $6 per gallon for the first time, and gasoline prices remain high.

White House spokesperson Taylor Rogers said US refining capacity is “essential to ensuring the United States has a steady supply of safe, reliable, and affordable energy,” emphasizing that expanding this capacity is a top priority for the president and his energy team.

She added that the administration is considering practical options to boost refining capacity through regulatory reform, faster permitting, and increased investment.

The focus on expanding refining capabilities comes as the US administration increasingly points to boosting domestic capacity as part of its strategy to address fuel price hikes linked to tensions with Iran, making the potential move a long-term hedge against global supply disruptions.

At the same time, the administration is working to secure more foreign oil supplies. The US government recently acquired a 35% ownership stake in North American Blue Energy Partners, a privately owned Venezuelan oil company, which has rights to develop 17 oil fields with proven reserves of about 65 billion barrels.

The agreement gives the US government rights to purchase Venezuelan crude, including 20% of the company’s output at production cost. The White House says millions of barrels of new Venezuelan production will ultimately be processed by US refineries.