Chris Wright’s Latest Quest Shows America Needs More Refineries

Energy Secretary Chris Wright met with executives from refining companies on Monday to explore ways the Trump administration could help them boost throughput volumes to help keep America’s gasoline and diesel market fully supplied. The meeting took place in Midland, Texas during an industry conference Wright was attending.

Wright and the White House believe an increase in refined volumes could hold the key to lowering prices for gas and diesel at the pump. The administration’s concerns are not surprising given the fact that gasoline prices have stubbornly remained above $4.00/ gallon nationwide amid the ongoing Iran Conflict, a dollar higher than a year ago. Though still a dollar below the highs reached during the Biden autopen years, the current price paradigm could have a significant impact on November’s midterm elections.

Wright told reporters that the Department of Energy (DOE) would announce steps later this week it can take to help spur higher throughput even though his own Energy Information Administration reported last week that U.S. refineries have been sustaining unusually high activity levels for months now. Some companies have expressed concerns in recent weeks that the current 96.2% capacity level cannot be sustained for much longer as some refineries are already well past their regular periodic maintenance downtime schedules.

It’s hard to see how the feds can spur even higher output levels through this limited refining fleet. Secretary Wright will be looking for short-term measures, like possibly suspending fuel blending requirements under the Environmental Protection Agency’s (EPA) haze reduction program. That move would have made even better sense to take in April when refiners are annually forced to switch over to costly summer blends that always raise gas prices at the pump just as summer driving season ramps up.

The real enduring problem related to America’s refining industry is that there isn’t enough of it: The U.S. industry hasn’t opened a single new major refinery in almost half a century now. The simple fact is that the United States needs more refineries if it is to keep more of its record, world-leading oil production at home for domestic use instead of having to export three million to five million barrels of the light, sweet crude produced from the Permian Basin every day because there isn’t enough domestic refining capacity to handle it.

A single new greenfield refinery is under construction today by America First Refining at the Port of Brownsville, Texas. Scheduled for completion in late 2027, the America First Refinery will have an initial capacity to process up to 168,000 barrels of light, sweet crude per day. As substantial as that is, it puts only a small dent in the overall magnitude of the capacity shortage.

Make no mistake about it, building new refineries is not remotely a short-term solution. In an interview in March, AFR CEO John Calce told me just obtaining the mandatory air quality permit under the Clean Air Act consumed a full seven years for a facility that will take less than 3 years to construct. That’s a regulatory roadblock which has discouraged many other potential refinery projects since 1979.

Wright’s push also comes amid a trend among big shale producers to trim back on drilling budgets in favor of allocating capital to stock buybacks and other returns to investors. That also is not surprising given that it has been the prevailing operational model for shale producers since at least 2019, as Irina Slav points out in a story at Oilprice.com.

No one should doubt Wright’s contention during a Monday interview that the Permian Basin and other shale basins are capable of further increasing production of both oil and natural gas. The main variable in that equation is the willingness of the companies doing most of the drilling to allocate capital to meet that goal.

Most big oil-producing countries source most of their oil through a national oil company like Saudi Arabia’s Aramco that is responsive to government edicts and needs. But in the United States, oil and gas are drilled, produced, and refined by hundreds of privately held companies executing on their own discreet business plans.

Thus, persuasive though Mr. Wright certainly is, persuasion is really the only tool he and the White House possess to wring more throughput out of America’s already stressed refining industry.

David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.