White House Considers DPA for Oil Refining Amid Near‑Full Capacity and Iran‑Linked Supply Strain

What Happened

The White House is examining whether to invoke the Defense Production Act to expand domestic oil refining capacity after refineries operated at 97.8% of usable capacity for the week ending September 4, 2026, according to the Energy Information Administration. Diesel prices reached $6.06 per gallon on Friday, September 11, the first time the national average topped $6, up from $5.85 on September 4 and $3.71 a year earlier, AAA data showed.

President Donald Trump told reporters at Joint Base Andrews on Wednesday, September 9 that oil prices will not fall before the November midterm elections, saying “Right after the election, oil prices are going to be tumbling downward.” White House spokeswoman Taylor Rogers told the Daily Caller News Foundation that expanding refining capacity remains a top priority for the President and his energy team, who are evaluating concrete options to increase capacity through regulatory reform, faster permitting, and additional investment. Trump met with nearly a dozen refiners at the White House on September 1 to discuss the matter.

What the Evidence Establishes

The sources confirm that the Defense Production Act has never been used to add refining capacity in its seventy‑year history. Administration officials told Reuters that federal money should go to making existing plants more efficient or expanding them rather than building a new refinery, two anonymous officials familiar with the plans said. America First Refining has announced plans for a 168,000‑barrel‑per‑day facility at the Port of Brownsville, Texas, a project first disclosed by Trump in March and touted as the first new Gulf Coast refinery in nearly fifty years.

Donald Trump Jr. holds a passive minority stake in America First Refining, per a June ProPublica report, while Cantor Fitzgerald—formerly led by Commerce Secretary Howard Lutnick—serves as the company’s financial adviser. The Pentagon’s Office of Strategic Capital holds a 35% interest in North American Blue Energy Partners, a Venezuelan firm with rights to seventeen oil fields, and the White House says its output will eventually be processed through U.S. refineries. Iran has blockaded the Strait of Hormuz since its war began on February 28, 2026; the Strait carried roughly one‑fifth of global oil and petroleum product consumption in 2024‑early 2025 according to EIA data.

Where the Accounts Conflict

While the White House spokeswoman characterized expanding refining capacity as a top priority, the same Reuters briefing noted that administration officials told the President that federal funds should be directed toward improving efficiency at current refineries rather than financing entirely new construction. This creates a tension between the stated presidential goal and the staff’s preference for upgrading existing assets.

Additionally, sources emphasized that a brand‑new refinery would cost far more and take years to complete, whereas retrofitting existing units could be accomplished more quickly and at lower expense. The uncertainty over whether the Brownsville project would actually receive DPA funding contrasts with the administration’s public emphasis on expanding capacity, leaving the ultimate path of any DPA invocation unclear.

Context and Stakes

The Defense Production Act of 1950 was designed to mobilize industrial output for national defense; historically it has been used to surge production of medical supplies, aircraft, and telecommunications gear during emergencies, but never to increase oil refining capacity. U.S. refining utilization has hovered above 95% for much of 2026, leaving little buffer for supply disruptions and making the system sensitive to any shock in crude flows.

Geopolitically, Iran’s blockade of the Strait of Hormuz removes about twenty percent of global oil trade from the market, exerting upward pressure on diesel and gasoline prices. The Pentagon’s stake in a Venezuelan oil venture suggests the administration is also seeking to diversify crude sources that could be processed domestically. Any increase in refining yield would directly affect diesel prices, inflation trends, and the broader energy security posture heading into the winter season.

What to Watch Next

Within the coming days, analysts should monitor whether the White House issues a formal directive to the Department of Energy outlining criteria for DPA‑eligible refining projects. A memo or Federal Register notice would signal a move toward concrete action, while silence would suggest the idea remains under review.

Market participants will watch for any announcement of DPA‑financed pilot programs targeting efficiency upgrades at existing Gulf Coast refineries, as well as the administration’s stance on the Brownsville proposal. Congressional committees overseeing energy and defense may hold hearings, and environmental groups could file legal challenges if funds are perceived to favor fossil‑fuel expansion over alternative energy.

Bottom Line

The administration is actively studying the use of the Defense Production Act to address tight refining markets, but the evidence points toward a preference for boosting efficiency at current facilities rather than underwriting a wholly new refinery. If DPA funds are allocated for retrofits, a modest capacity increase of one‑to‑two percent could be realized within six months, potentially easing diesel price pressures. Conversely, if the administration opts for new construction or takes no action, utilization is likely to remain near current high levels, leaving prices vulnerable to further supply shocks from the Iran‑related Strait blockade or seasonal demand spikes.