White House Eyes Defense Production Act as U.S. Refinery Utilization Hits 98%
With U.S. refineries at 98% utilization and diesel inventories 13% below seasonal norms, the Trump administration is weighing Defense Production Act emergency powers to add throughput.
The Trump administration discussed invoking the Defense Production Act to expand U.S. refining capacity, oilprice.com reported on Friday (2026-09-11), with American refineries already operating at 98% utilization and retail diesel prices above $6 a gallon for the first time.5
NYMEX ULSD heating oil front-month traded at $5.00 per gallon as of Friday (2026-09-11), unchanged on the day. The gap between the futures price and retail diesel above $6 reflects the wholesale-to-pump spread and regional distribution costs, a margin that tends to widen when physical supply is tight and logistics are strained. Futures at $5.00 while retail has cleared $6 suggests the physical market has already tightened well ahead of the paper market.5
Refinery utilization reaching 98% in late August 2026, oilprice.com reported, capped three consecutive months above 95%, the longest such stretch since 2000. The sustained pace has been driven by collapsing imports from the Middle East, with U.S. processors filling the export gap left by disrupted regional supply chains.5
U.S. diesel inventories now stand 13% below their five-year seasonal average. The drain has been consistent throughout the year. EIA data through the week of May 25 (2026-05-25) showed crude stocks falling for eight straight weeks, finishing 3% below the five-year average, with diesel and jet fuel also tracking 3% under that benchmark. By June 4 (2026-06-04), oil industry executives were warning the administration that stocks were nearing what one source described to E&E News as "tank bottom," with the Strategic Petroleum Reserve simultaneously approaching the low reached after the Biden-era releases following Russia's 2022 invasion of Ukraine.5,1
Phillips 66 estimated in August 2026 that roughly 7 million barrels per day of refining capacity was offline across Asia and the Middle East, with another 1.4 million barrels per day unavailable in Russia. That global deficit transferred the refining burden to the United States, which has been sustaining record fuel exports even as domestic stocks drew down.5
The Defense Production Act discussion, as oilprice.com reported it, remains at the proposal stage. The DPA's historical application involves redirecting existing industrial resources rather than creating physical capacity from scratch. Refinery equipment cannot be ordered to run beyond its engineering limits, and new distillation capacity takes years to permit, build and commission. The discussion signals political alarm more than a near-term operational solution.5
A separate, seasonal supply constraint is approaching. Canadian oil sands producers run scheduled maintenance in September 2026, oilprice.com noted on August 25 (2026-08-25), and U.S. refineries processing heavy crude slates have depended on Canadian feedstock to sustain throughput. Any seasonal decline in that crude supply would force utilization cuts. Demand would not need to weaken for that to happen; crude input would be the binding constraint.4
Geopolitical risk has shaped the backdrop throughout 2026. Brent surged roughly 7% in a single session and extended its monthly advance to over 35% after Houthi attacks on Saudi tankers in the Red Sea, Rigzone reported on July 23 (2026-07-23). J.P. Morgan, in a commodities report sent to Rigzone on July 17 (2026-07-17), noted that Hormuz traffic had recovered briefly in early June 2026 before falling back to 5.1 million barrels per day. ICE Brent crude front-month was at $104.77 per barrel and NYMEX WTI front-month at $100.30 per barrel as of Friday (2026-09-11).3,2
If Canadian crude maintenance in September 2026 tightens feedstock availability before any DPA directive materialises, refineries would face throughput cuts from the crude input side. Diesel stocks at 13% below their seasonal average provide limited cushion. NYMEX ULSD heating oil front-month at $5.00 per gallon has not yet priced that scenario.4,5