White House Weighs Using Defense Production Act to Expand US Oil Refining Capacity

The White House is actively considering invoking the Defense Production Act to expand domestic oil refining capacity, according to two sources cited by Reuters on September 11. The move would deploy the Cold War-era law, which grants presidents broad authority to direct private industrial production, to address a bottleneck in refining that has kept fuel prices elevated even as crude prices have eased.

The push comes against a backdrop of sharply higher pump prices, with the national average for regular gasoline running around $4.10 per gallon, up from roughly $3.19 a year earlier, and August on track to be the most expensive on record at the pump. Refinery constraints have been worsened by the Iran war, which disrupted crude and refined-product flows through the Strait of Hormuz and knocked an estimated 5 million barrels per day of global capacity offline, according to Valero. Exxon CEO Darren Woods noted in late July that the resulting disconnect between crude and pump prices means additional oil supply alone may not quickly translate into cheaper gasoline.

The White House had earlier in the year, in April, already signed presidential determinations under Section 303 of the Defense Production Act addressing petroleum production and refining as well as other energy sectors, framing domestic refining capacity as central to national defense readiness. The September deliberations reported by Reuters suggest the administration is weighing additional or more targeted use of that authority specifically to accelerate refinery expansion. The story immediately drew market attention to energy stocks including Exxon Mobil, Chevron, ConocoPhillips, and oilfield services names.