President Trump convened oil refining executives at the White House on Tuesday and urged them to build new U.S. refineries capable of producing more gasoline, part of an effort to bring down pump prices before the November midterm elections.
“The President made clear that he wants lower gas prices at the pump for Americans. The refiners and distributors shared that goal and commitment,” a U.S. official said of the meeting.
Operators have no plans to expand their fleets, according to executives and analysts, because they do not expect the current period of high profitability to last.
At the meeting, Trump and the executives discussed cutting regulations, speeding up the permitting process, and making additional investments to expand the nation’s refining capacity, the official said. The White House also said Trump’s surprise deal to take a direct stake in a large swath of Venezuela’s oil reserves means the country needs more refining capacity to absorb barrels as Venezuelan production comes online.
Among those gathered were executives from Chevron, Valero Energy, Marathon Petroleum, and PBF Energy. ExxonMobil, the nation’s third-largest refiner, did not send a representative. Some companies were initially wary of attending, given Trump’s recent attacks on the industry for not cutting gasoline prices more quickly.
Building a new refinery would require an investment of several billion dollars and three to five years of construction. By the time such a facility could come online, industry analysts expect the current energy-market dislocation to have largely resolved.
“Nobody’s going to go out and make a huge multibillion-dollar investment based on three months of record margins,” said Robert Campbell, an analyst at Energy Aspects in New York. “You really think there’s going to be another situation where Russia’s being attacked, and there’s a crisis in the Middle East, and China has slowly stopped exporting products?”
The current environment, six months into the war, has been highly profitable for U.S. refiners. The supply crunch for diesel, jet fuel, and gasoline has overtaken upheaval in the crude-oil market as the energy industry’s primary concern. To keep up with demand, U.S. refineries have been running at over 97 percent of their collective capacity in recent weeks, near their highest rate in about eight years, according to the Energy Information Administration.
“The utilization that we’ve seen can’t be sustained for the long term,” Darren Woods, the chief executive of ExxonMobil, told investors in late July. “I think this refining challenge is going to be with the world for a while.”
The diesel “crack spread,” the difference between what refiners pay for oil and what they charge for fuel, recently hit a record above $100 a barrel. The top six American energy companies that turn oil into refined products made a combined $24.7 billion on fuel-making in the second quarter, nearly five times as much as a year earlier.
Higher refining earnings have coincided with higher pump prices. Americans paid about $4.10 a gallon on average Tuesday, according to AAA, up from $2.98 before the start of the conflict in Iran. Some refining companies are putting off scheduled maintenance to take advantage of the lofty margins on diesel and other fuels.
But much of what is driving fuel prices higher is beyond the control of either the president or the industry. Refining capacity has been declining for decades, and new construction faces permitting and demand challenges that executives cited as reasons against expansion.
America has 128 fewer refineries than it did in 1982. The newest was completed in 1977; roughly a quarter of current U.S. refineries were built more than a century ago. Building new ones faces formidable obstacles, including acquiring the permits needed from federal, state, and local governments. The oil industry has tried for years to convince Congress to overhaul the permitting process to clear the way for pipelines and other energy infrastructure.
Gasoline demand, meanwhile, is expected to decline over the long term as drivers buy more electric vehicles and engines become more efficient.
“Who wants to invest in something that, by the time you build it, the demand is down?” said John Auers, marketing director of refined fuels at oil-and-gas data analytics firm Novi Labs.
Auers estimates oil companies have room to add 400,000 barrels a day of refining capacity by expanding their existing facilities in Texas, Louisiana, and other Gulf Coast states over the next 20 years — roughly equivalent to the capacity of one large refinery.
Trump said in March that a startup called America First Refining would open the first new U.S. oil refinery in 50 years in Brownsville, Texas, in a $300 billion deal meant to bring jobs and economic growth to South Texas. Yet the region lacks infrastructure to deliver sufficient oil to a refinery, and financing such a project would be a challenge, as would securing permits.
Rather than building new refineries, big oil companies are spending hundreds of millions of dollars to shift production from gasoline — the fuel most affected by the rise of electric vehicles — to diesel, petrochemicals, and lubricants. ExxonMobil is expected to spend about $2 billion to upgrade its Baytown, Texas, refinery to make more diesel and lubricant base stocks, and less gasoline, starting in 2028. Chevron has a similar, smaller project at its Pascagoula refinery in Mississippi.
Chevron Chief Executive Mike Wirth has suggested his company would continue pivoting toward oil production versus refining over the long term.
“I love our refining business,” he told investors last year. “I don’t want to say that we would never do something in refining because if it were the right opportunity, we could. But we’ve long had a view that we want to be a more upstream-weighted company.”