Will Additional Refinery Capacity Help U.S. Elections?

Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

Summary

With the White House fretting over fuel-related inflation ahead of pivotal midterms, Industrial Info Resources finds U.S. projects worth a total investment value of $190 million could add barrels to an already-overworked refinery network.

Diesel Fuel Price Up, Up and Away

Fuel Travel club AAA on Friday put the national average retail price of a gallon of diesel at $6.32, compared to $3.63 per gallon at the same time last year. Ukrainian drone strikes on the refinery network in Russia, along with ongoing bottlenecks in the Middle East for waterborne deliveries of refined petroleum products, have added a considerable risk premium to the price of diesel.

Industrial Info finds projects in Illinois, Texas and Louisiana could add 74,000 barrels per day (bpd) to the U.S. refinery network by the end of 2027 at a total cost of $190 million. A further $115 million could add another 67,000 bpd by the end of 2031, according to Industrial Info Resources project data. That's not enough, however, for the U.S. Energy Information Administration (EIA) to forecast any significant relief, with retail diesel prices expected to remain above $4 per gallon through 2027.

Additions by next year would offset only about half of what was lost by the April closure of the Benicia refinery in California, which was operated by Valero. U.S. Energy Secretary Chris Wright said last week that the federal government was in talks with refinery owners to see which of the facilities shuttered over the last decade could be revived.

On Thursday, meanwhile, Wright said that U.S. President Donald Trump would use the Defense Production Act to provide up to $150 million to expand domestic production of refined petroleum products.

"These Defense Production Act funds will be used strategically and in partnership with private industry to rapidly bolster America's existing energy infrastructure," he said.

Enacted in response to the Korean War, the measure gives the president a wide berth in working to strengthen the production of goods for the sake of national security. Data from Industrial Info show refineries already added some 22,000 bpd to throughput capacity this year without federal support.

For the general public, fuel prices are a nagging concern, and it's unlikely the Department of Energy's efforts would lead to immediate relief.

Elsewhere, operational refineries are already chugging along at close to peak capacity to take advantage of soaring refinery margins and to address lingering supply-side issues stemming from various conflicts overseas.

The EIA on Thursday reported that domestic refineries ran at more than 95% of their capacity between May and September, the highest rate for those months in nearly 30 years.

Elsewhere, the EIA in its monthly market report for October found consumption of distillates, a refined product category that includes diesel, was expected to be below year-ago levels for both 2026 and 2027. Retail diesel prices, meanwhile, were expected to average $5.19 per gallon this year and $4.49 for 2027.

By the Numbers

• 74% year-on-year spike in U.S. retail diesel prices
• $150 million offered up to refineries to do more
• Nearly 100,00 bpd -- total U.S. refining capacity added in 2026 or planned to be added in 2027 without federal help, according to IIR

Key Takeaways

• The Trump administration is working to drive fuel prices down ahead of midterm elections.
• Refinery additions in 2027 only offset about half of the capacity from a refinery shuttered in April in California.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).