- American refineries operating at 98 percent capacity as diesel crosses $6 a gallon for the first time, with Trump administration exploring an unprecedented use of the wartime-era law amid pressure ahead of the November midterms
WASHINGTON 12 SEPTEMBER 2026 (Agencies) – The White House is considering invoking the Defense Production Act to expand US oil refining capacity, as American refineries run at 98 percent capacity and the national average diesel price has climbed above 6 dollars a gallon for the first time, according to Reuters, citing sources familiar with the matter.
The proposal was discussed during a recent meeting between President Donald Trump and nearly a dozen US refiners, at which White House officials asked attendees how federal funding could most effectively be used to increase refining capacity. No final decision has been made, and discussions are expected to continue. Refining executives told administration officials that federal money would be better directed toward improving the efficiency of existing plants or expanding them, rather than financing an entirely new refinery, which would cost billions of dollars and take years to build.
The Defense Production Act was enacted in September 1950, shortly after the outbreak of the Korean War, to support the supply of materials needed for national defense. It grants the US president sweeping powers, including the ability to compel private companies to boost production of goods considered critical, and to provide financial assistance such as loans, loan guarantees and purchase commitments to expand capacity. The law is considered a tool of last resort and has never previously been used to add oil refining capacity. The current discussions build on a presidential determination Trump issued in April, declaring domestic petroleum production, refining and logistics capacity essential to national defense and authorising purchases, purchase commitments and other financial instruments under Section 303 of the act to increase that capacity.
US refiners currently have little spare room. Refinery utilisation reached 98 percent in late August after three consecutive months above 95 percent, the longest such stretch since 2000. That output has become increasingly valuable as refining capacity disappears elsewhere: Phillips 66 estimated last month that roughly 7 million barrels per day of refining capacity was offline in Asia and the Middle East, with a further 1.4 million barrels per day unavailable in Russia. US diesel inventories are now 13 percent below their five-year average, with diesel prices crossing 6 dollars a gallon this week as disruptions in the Middle East and Russia squeezed global fuel supplies. The national average diesel price hit 6.06 dollars a gallon, up 63.3 percent from 3.71 dollars a gallon a year earlier, while the average gasoline price climbed to 4.29 dollars a gallon.
Reuters reported that the discussions reflect the White House’s acute sense of urgency over stabilising surging fuel prices ahead of the November midterm elections. In recent weeks, the administration has increasingly pointed to expanding domestic refining capacity when asked how it plans to respond to fuel-price spikes linked to the conflict with Iran, making the push both a longer-term effort to buffer against global supply disruptions and part of its broader response to affordability concerns ahead of the vote. US refining capacity has also shrunk structurally over the past decade, as some facilities closed due to deteriorating profitability, leaving remaining capacity heavily concentrated along the Gulf Coast.
One possible test case is already taking shape in Texas. America First Refining plans a 168,000-barrel-per-day refinery at the Port of Brownsville, announced by Trump in March as the first new US refinery in nearly 50 years. The project is backed by India’s Reliance Industries, which has agreed to a 20-year deal to buy the refinery’s output, and has also been reported to have ties to Trump’s family and administration. It remains unclear whether the project could receive Defense Production Act funding.
The administration is separately working to boost foreign crude supply available to US refiners. Trump recently secured a 35 percent US government equity stake in North American Blue Energy Partners, a private Venezuelan oil company that holds development rights to 17 oil fields with an estimated 65 billion barrels of proven reserves. The agreement gives the US government rights to purchase Venezuelan crude, and the White House has said millions of barrels of new Venezuelan production will eventually be processed through US refineries.