U.S. President Donald Trump has invoked the 1950 Defense Production Act in an effort to boost domestic oil and fuel production and curb rising diesel and gasoline prices. The law, which was enacted during the Korean War, allows the federal government to direct funding, loans and guarantees to industries deemed important to national security.
On April 20, Trump signed a series of presidential memoranda on coal supplies, domestic oil production, natural gas transportation, liquefied natural gas capacity and the electric grid. The White House presented the measure as a way to use funds from the passed budget law to build a more secure and affordable energy system.
“Lower prices for Americans, especially farmers, ranchers and truck drivers, are my top priority“, Trump said.The decision was made against the backdrop of a sharp increase in fuel prices, which the administration linked to the war in Iran, the war in Ukraine and restrictions on global supplies. According to data cited by Reuters, the average price of diesel in the United States reached $ 6.28 per gallon on October 8, and gasoline cost an average of about $ 4.37 per gallon the next day.
The first concrete project is in Texas
On October 13, Vice President J.D. Vance announced that the administration would use the law to expand the Delek US Holdings refinery in Tyler, Texas. The facility, located about 322 kilometers north of Houston, processes approximately 74,000 barrels per day.
“We want this refinery to produce millions of gallons of commercial and military fuel in addition to the current production“, Vance said. According to him, this should lead to lower transportation costs and more reliable energy supplies. The amount of federal support and the expected capacity increase were not disclosed. Refinery expansions typically take months or years, depending on the complexity of the project.
Pressure to quickly increase supplies
On October 9, three energy industry sources told Reuters that Trump was preparing instructions to federal agency heads to limit diesel prices. The plan includes looking for ways to overcome state and local regulations that the administration says are slowing energy projects.
At the same time, Trump announced an agreement with Russia to immediately deliver more than 300,000 tons of diesel for the US and global markets. The Treasury Department has temporarily allowed imports of Russian diesel until April 7, 2027. Analysts quoted by Reuters have warned that this amount is unlikely to be enough to permanently lower prices.
The Korean War law may provide financial support and priority for strategic supplies, but it does not by itself guarantee an immediate drop in pump prices. The main question remains when the expansion of refineries and other measures will lead to a real increase in supply.
Sources: investing.com, marketscreener.com, ca.marketscreener.com