The Trump administration used the Defense Production Act to expand a small Texas refinery as fuel prices stay at record highs. The extra output is unlikely to reach the market before the midterms, and analysts say the U.S.-Russia diesel deal will make little difference, with diesel still above $6 a gallon.
The United States has used a 1950 authority to help boost fuel production at a small Texas refinery, Vice President JD Vance said on Tuesday. The Trump administration is running out of levers to lower record-high fuel prices.
A refinery expansion with no timeline
Vance said at a political rally in Texas that the administration, working with the refinery at Delek, will expand the plant in Tyler. He said the goal is for millions of gallons of commercial-grade and military-spec fuel to come out of the refinery in addition to what it already produces.
However, Vance gave no timelines or volumes. The Delek refinery processes 74,000 barrels per day, and it is uncertain how long the expansion would take or whether the law would reach other refineries. Extra output is unlikely to hit the market within three weeks, before the midterm elections on November 3.
Pump prices stay elevated
Gasoline and diesel prices remain high despite slight declines in recent days. The national average for regular gasoline was $4.34 per gallon on Tuesday. Diesel averaged $6.28 a gallon, down from $6.31 a week earlier but well above $3.65 a year ago.
Analysts say diesel will likely stay above $6 for quite some time. The global diesel market is exceptionally tight because too little fuel is leaving the Strait of Hormuz and Russian refineries are struggling under Ukrainian drone attacks.
Russia deal fails to calm wholesale diesel
The U.S.-Russia diesel deal covers 35.76 million barrels in total, if it is executed at all. Analysts say that equals about 10 days of U.S. domestic diesel demand.
Wholesale diesel futures rose again this week. Ole Hansen of Saxo Bank said ULSD in New York and gasoil in London both traded around $200 per barrel on Tuesday.
Tom Kloza, chief energy advisor at Gulf Oil, noted on Tuesday: "Market clearly not believing that Russian oil is on the way." Kloza said the retail diesel record of $6.53 per gallon could be topped by the midterms.
Source: Oilprice.com
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