- President Donald Trump determined on Thursday that petroleum production, refining and related activities are essential to national defense. In a presidential memo, he also invoked part of the Cold War-era Defense Production Act, allowing him to provide financial incentives for oil-related activities, pipelines and storage of liquid fuels.
- The memo did not name specific projects, but it said the US cannot supply enough of these energy services in a “timely manner” because of constrained financing, long lead times, permitting and infrastructure bottlenecks, and supply chain limitations. Trump signed legislation last year that included $1 billion in Defense Production Act funding for energy-related projects deemed critical to national security.
- Crude oil and diesel prices have surged since the US and Israel attacked Iran in joint action at the end of February, and the conflict has limited energy shipments globally. Ukrainian attacks on Russian refineries have made the fuel shortages worse.
- The move lands ahead of the November 3 elections, in which Republicans are trying to keep control of both chambers of Congress. A Reuters/Ipsos poll that closed Monday shows just 36% of Americans approve of Trump’s handling of the economy.
What Happened?
Trump’s memo determined that petroleum production, refining and related activities are essential to national defense, a move that could open up US funding for fossil fuel projects, CNBC reported. The section of the Defense Production Act he invoked lets the president offer financial incentives for oil-related activities, pipelines and liquid fuel storage. The memo argued that without these actions the US cannot provide enough of those energy services in a timely manner. Last week, Vice President JD Vance said the administration would use the act to expand capacity at a Texas refinery owned by Delek US Holdings.
Why It Matters?
The memo reframes fuel supply as a national security issue, giving the administration a tool to steer capital toward refining, pipelines and storage rather than relying on private financing alone. The bottlenecks it cites, from financing to permitting, are supply-side constraints, so the incentives aim at expanding capacity rather than curbing demand. Politically, high fuel costs are a risk for Republicans heading into the elections, giving the White House a clear incentive to be seen acting on prices.
What’s Next?
The key question is which projects receive funding, since the memo did not name any. Delek’s Texas refinery, flagged by Vance last week, is the first known candidate for support under the act. Investors will watch how quickly the $1 billion in Defense Production Act energy funding approved last year is deployed. Any easing in crude and diesel prices will also depend on the course of the Iran conflict and attacks on Russian refineries, not just US policy.
Affected Tickers and Coins: CL, HO, DK, XLE
Source: CNBC
