Trump Administration Weighs Defense Production Act To Boost Oil Refining Capacity, Says Report — DK, VLO, PSX, DINO, MPC Stocks In Focus

• The proposal came up in a recent meeting between Donald Trump and U.S. refiners, but no decision has been made.
• Refiners favor federal funding for efficiency upgrades and expansions at existing plants over building new facilities.
• The Defense Production Act has never been used to add U.S. refining capacity and gives the president broad powers to direct industrial resources.

The White House is reportedly considering using the Defense Production Act to expand U.S. refining capacity as the Iran conflict exposes vulnerabilities to global oil-supply disruptions and pushes fuel prices higher, pressuring the administration to contain energy costs ahead of the November midterm elections.

The proposal came up during a recent meeting between President Donald Trump and many U.S. refiners, where White House officials sought to determine how federal support could best be used to add refining capacity, according to Reuters.

Publicly traded companies in the refining space include Delek US Holdings Inc. (DK), HF Sinclair Corporation (DINO), Marathon Petroleum Corp. (MPC), Phillips 66 (PSX) and Valero Energy Corp. (VLO).

Shares of DK were up 3% on Friday at the time of writing, while DINO and VLO were both up around 2.5%. MPC stock was up 2.75%, while PSX shares gained 1.4%.

Refiners Seek Expansion Of Existing Plants

The push to expand refining capacity comes as the Trump administration faces pressure to limit the effect of higher fuel prices on consumers and businesses ahead of the midterm elections.

Refining executives told White House officials that federal support should focus on improving efficiency and expanding existing plants. A new refinery would cost significantly more and take years to complete, the Reuters report said.

“America’s refining capacity is essential to ensuring the United States has continuous access to secure, affordable, and reliable energy. Expanding that capacity is a top priority for the President and his energy team, who are evaluating concrete options to increase our refining capacity through regulatory reform, faster permitting, and additional investment,” Taylor Rogers, a White House spokeswoman, told Reuters when asked about the proposal.

Defense Production Act

The Defense Production Act gives Trump the authority to direct industrial resources and offer financial incentives to companies that expand production of materials considered important to national defense. The law is viewed as a last-resort tool and has never been used to increase refining capacity, according to Reuters.

The administration’s latest discussions follow an April presidential determination that authorized the act to support and expand U.S. petroleum production, refining, and logistics capacity.

The United States is one of the world's largest oil refining powers, with a vast network of plants capable of processing millions of barrels of crude a day. However, the national average diesel price has climbed above $6 a gallon for the first time, while gasoline prices remain elevated, Reuters stated.

Stocktwits Retail Sentiment

On Stocktwits, retail sentiment for DK, PSX and MPC was ‘neutral’ amid ‘normal’ message volume. Sentiment for VLO was ‘bullish,’ also with ‘normal’ message volume, while DINO saw ‘bearish’ sentiment amid ‘high’ message volume.

The refining stocks have also posted strong gains so far this year. DK has surged nearly 160% year-to-date, followed by MPC at 145%, VLO at 140%, DINO at 137% and PSX at 104% during the same period.

Also See: YUM, WMT Stocks In Focus: CDC Declares Cyclospora Outbreak Over After Nearly 13,000 Cases

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