Energy Department Offers $150 Million to Expand Fuel Output, Restarts Uncertain

The U.S. Department of Energy is offering up to $150 million to expand domestic fuel production while officials contact owners of refineries closed during the past decade. The two-part plan combines financial support for operating infrastructure with an exploratory search for plants that might be reopened but no refinery restart has been confirmed.

The Energy Department funding plan uses Title III of the Defense Production Act for petroleum production, storage and refinery-logistics projects. DOE says the supported projects are intended to add millions of gallons per day of refining output. Energy Secretary Chris Wright has separately acknowledged that reopening closed plants is difficult and that not every site under discussion will return.

The pressure is immediate for households and businesses. National averages cited from AAA put regular gasoline above $4 per gallon and diesel above $6. Diesel costs propagate beyond motorists because the fuel is widely used in freight, agriculture and industry. The International Energy Agency expects global diesel markets to remain tight into 2027 after supply disruptions depleted inventories.

Operating refineries have little unused room

The first constraint is utilization. The American Petroleum Institute reports that most operating U.S. refineries are already running at 95% to 100% of capacity. That leaves limited room to obtain a large, sustained increase merely by pushing existing equipment harder.

High utilization also makes maintenance discipline important. A refinery cannot run continuously without inspections, repairs and planned outages, and nominal processing capacity is not the same as dependable production every day. Grants directed toward bottlenecks, storage or logistics may increase usable output, but their effect will depend on whether they remove a genuine constraint rather than subsidize capacity that would have operated anyway.

The funding therefore has to be evaluated by incremental production: how much additional gasoline, diesel, jet fuel or other product a project delivers, how reliably it can deliver it and how long the improvement takes. DOE has not yet announced project selections, so the geographic distribution, private cost-sharing and output associated with individual awards remain unresolved.

A closed refinery is not an ordinary idle factory

Restarting a refinery involves more than restoring electrical power and bringing workers back. Equipment condition must be assessed after shutdown, maintenance backlogs addressed and operating permits secured. The owner also needs a suitable crude supply, storage and transportation connections, trained personnel, working capital and confidence that the plant can operate economically after the immediate shortage passes.

A historical example illustrates the scale. A proposed restart of the mothballed 350,000-barrel-per-day Hovensa refinery in St. Croix called for nine to 12 months of engineering analysis, followed by rehabilitation expected to take as long as 24 months and cost more than $1 billion, including worker retraining. That project is not one of the newly announced awards, but it shows why discussions with an owner cannot be treated as near-term production.

The recently closed plants identified as possible context for the outreach are substantial: Valero’s Benicia refinery was rated at 145,000 barrels per day, Phillips 66’s Los Angeles complex at 139,000 barrels per day and LyondellBasell’s Houston facility at 264,000 barrels per day. Those nameplate figures indicate potential scale, not output that can be restored on demand. Wright described a Benicia restart as especially difficult and has cautioned that the broader talks may not produce restarts at every site.

Public funding addresses only part of the barrier

The legal basis is a presidential determination classifying domestic petroleum production, refining and logistics as essential to national defense. It identifies constrained financing, long lead times, permitting, infrastructure bottlenecks and supply-chain limitations as reasons federal support is needed.

That scope allows funding to target more than refinery processing units. Storage and logistics can matter when finished fuel cannot be moved efficiently to the markets experiencing shortages. Conversely, expanding tanks or transport links will not help if the binding constraint is unavailable processing equipment, unsuitable feedstock or an uneconomic plant configuration.

Wright has blamed earlier political leadership for refinery closures, but that partisan characterization is separate from the project-level questions governing a restart. Each facility still requires a viable engineering plan, regulatory path, workforce, supply chain and operating case.

The $150 million may help finance focused improvements across existing facilities, where relatively contained work can unlock additional output. Reopening a large, long-idled refinery can require far more capital and time. The next meaningful milestone is therefore DOE’s project selection: which physical bottlenecks receive funding, how much private investment accompanies it and how many additional gallons those projects can demonstrably produce.

By Thomas Caldwell — AMI’s senior editor for mechanical and mobility engineering, covering vehicle electronics, systems integration, electrification, chassis systems, propulsion, and safety policy.