IER: Trump Administration Considers Reopening Shuttered Refineries
[Note: Another terrific analysis from the energy experts at the Institute for Energy Research. Enjoy.]
Key Takeaways
1 The Trump Administration is looking for ways to expand refining capacity in the United States to meet demand and lower consumer prices.
2 In addition to the first large new refinery in decades to be built in Brownsville, TX, the administration is looking to reopen shuttered refineries in the U.S. Virgin Islands and other locales.
3 Oil prices have dropped significantly, but Ukrainian attacks on Russian refineries and a Chinese ban on fuel exports following the Iran conflict, along with reduced fuel shipments through the Strait of Hormuz, have kept fuel prices high.
4 Distillates have become especially high-priced relative to oil prices due to constrained refinery production, even as U.S. refineries run at full capacity to meet demand for gasoline and distillate.
5 Estimates indicate that global refining capacity is 5 million barrels short of where it should be, owing to ongoing hostilities in the Middle East and Ukraine/Russia.
6 The Trump Administration is hoping to speed the reopening of refineries to help alleviate pain at the pump and transportation costs associated with higher fuel prices due to a shortage of refining capacity.
Oil majors warn of a continuing tight market for petroleum products due to a lack of global refinery capacity as the Ukraine and Iran wars have reduced the operations of refineries in Russia and the Middle East. In both Europe and the United States, refineries have shuttered due to onerous regulations and government policies. The Trump administration is considering reopening closed oil refineries, including the St. Croix refinery in the U.S. Virgin Islands, to address high gasoline and diesel prices. The St. Croix refinery, which was shut down in 2021, is of interest because of its strategic location and its ability to refine Venezuelan oil. U.S. refining capacity has dropped by nearly 5% from a high of about 19 million barrels a day in 2020.
