President Trump on Thursday said his administration will invoke the Defense Production Act to spend $150 million to boost gasoline and diesel production in the U.S., the latest effort from the administration to lower fuel prices.
The Defense Production Act, or DPA, is a Korean War-era law that allows the president to use loans, purchase commitments and other mechanisms to incentivize the production of critical materials and goods.
In a press release on Thursday, the Department of Energy said the DPA funding will increase U.S. refining output by millions of gallons per day and lower fuel prices for Americans, who have been paying more than $4 a gallon on average for gas over the last three months.Â
The announcement comes as polling shows a majority of Americans are pessimistic about the U.S. economy amid a growing affordability crunch. Crude oil prices have continued to climb, hitting their highest level this week since May.Â
On Friday, Brent crude, the international standard, was $116 a barrel, up 2.6%, while West Texas Intermediate, the U.S. benchmark, was around $103 a barrel, up 3%.
The national average for a gallon of gasoline stood at $4.29 on Friday and $6.32 for diesel, according to AAA. Those prices represent a 40% and 74% jump from a year earlier, respectively.
Passed in 1950, the DPA was originally aimed at boosting supplies for national defense purposes. However, Congress has broadened its application to address natural hazards, terrorist attacks and other national emergencies.
Will the measure be effective?
Experts told CBS News that invoking the DPA is unlikely to do much to lower fuel prices.
“I don’t think that’s really going to have any impact,” Patrick De Haan, a petroleum expert at GasBuddy, told CBS News in an email.
That’s partly because the U.S. already produces more fuel than it needs. Oil prices, however, are set on the global market, where the Iran war and Russia-Ukraine conflict have disrupted shipments, pushing prices higher.
The U.S. produces around 5.3 million barrels of distillate fuel oil, a category that includes diesel, per day but consumes only about 3.6 million barrels per day, experts have noted. The U.S. also produces 9.5 million barrels of gasoline per day, more than the 8.9 million consumed domestically.
The U.S. exports about 1.4 million barrels of diesel per day, Tom Kloza, chief energy adviser for Gulf Oil, told CBS News. Adding extra capacity would be a challenge given the constraints of U.S. refiners, he said.
“There is no slack in U.S. refining, so production can’t be added regardless of political will,” Kloza said in an email.
A spokesperson for the American Fuel & Petrochemical Manufacturers, a trade association that represents refiners, said it appreciated the Trump administration’s focus on the importance of refineries, while acknowledging the U.S. already produces more than it consumes.
Refineries are “running all-out to keep Americans supplied and the global economy moving despite major disruptions and actual fuel shortages in other parts of the world,” the spokesperson said in an email.
Another challenge for refiners is the time it takes to bring additional capacity online. Kloza said invoking the DPA could speed up some refining expansions or refinery resurrections, but that it wouldn’t produce any short-term benefits.
“Refineries take months and calendar quarters to bring units back to service,” he said in an email.
