Why Trump’s effort to build more refineries won’t lower gas prices

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President Donald Trump wants to reverse the decades-long decline in the number of US refineries in operation, which he believes is key to lowering gas prices, and he recently called oil executives to ...

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And even if a building boom were to start tomorrow, it would take years to produce the gasoline and diesel needed to alleviate current prices.\n    \n\n            American oil companies, meanwhile, aren’t exactly rushing to build refineries. While the industry is wildly profitable, it’s also aware that the current energy market disruptions are temporary.\n    \n\n            The spike in gas prices, triggered by wars in Iran and Ukraine, won’t last long enough to warrant the years of construction and multi-billion-dollar investment needed to build new refineries.\n    \n\n            “What’s the Strait of Hormuz going to look like in four to five years?” said John Auers, marketing director of refined fuels at data analytics firm Novi Labs. “The assumption is it’ll be opened by then, and Russian refineries will be back to normal. So, it doesn’t really matter what’s happening now or next year when making plans for a major expansion project.”\n    \n\n        Wars squeeze refining output\n\n\n            Refining capacity that is limited worldwide, rather than just in the United States, is a major reason for the spike in fuel prices this year, even more so than the Iran war cutting off crude oil shipments in the Strait of Hormuz.\n    \n\n            “In my 35 years in the refining business, there’s been an excess (refining) supply,” ExxonMobil CEO Darren Wood told CNBC earlier this summer. “(But now) we have a refinery constraint. So, pump prices are being established by supply and demand of refining products — not crude.”\n    \n\n\n\n\n\n\n\n\nVehicles queue at a a Gazpromneft petrol station in Moscow on August 18, 2026. Russian authorities acknowledged that some regions faces new gasoline shortages, as Ukraine steps up attacks on the country's oil refineries.\n\nAlexander Nemenov/AFP/Getty Images\n\n\n\n\n\n            Refineries in the Middle East and Russia have been damaged by military attacks. Russia, long a major exporter of refined fuel, is now a net importer due to fuel shortages at home, and even the facilities still operating in the Persian Gulf can’t export as much product due to ongoing shipping disruptions.\n    \n\n            It’s not the modest drop in US refining capacity in recent years that has increased prices, Auers said. “The problem is we’ve lost 2 million barrels per day of supply combined between Russia and the Middle East to global markets. That is huge in a market that was already fairly tight.”\n    \n\n            Oil prices have surged this year, recently climbing back above $100 a barrel. But despite the higher input cost for refiners, the sky-high prices for the products they sell have inflated their margins to record levels.\n    \n\n            US refiners now bring in about $100-a-barrel profit for diesel, and about $40 to $50 a barrel for gasoline, said Tom Kloza, an independent oil analyst and advisor to Gulf Oil.\n    \n\n            “These numbers aren’t just off the chart — they’re out of the galaxy,” he said.\n    \n\n            That’s made the economics of running a refinery incredibly profitable, so US refineries have been running at nearly 100% capacity this year, according to the US Energy Information Administration.\n    \n\n            Exxon’s Wood told investors earlier this year that the company had even deferred any maintenance to maintain output and profitability. The company raked in $14.5 billion in profit in the second quarter, more than double compared to the same quarter last year. But it can’t safely defer maintenance forever.\n    \n\n            “The utilization that we’ve seen can’t be sustained for the long term,” Wood told CNBC.\n    \n\n            Temporary shutdowns for maintenance will be inevitable later this year, said Auers. That will result in some reduction in the supply, pushing up prices.\n    \n\n        No easy solutions\n\n\n            Despite a sharp drop in the number of refineries over the last 45 years, the US has been able to get all the gas it needs from those that remain.\n    \n\n            Many of those that closed were smaller, less competitive refineries, Auers said. Plus, improved technology and efficiency — along with the expansion of the surviving refineries — meant that US capacity actually grew over time.\n    \n\n            Output rose 16% from 1999 to a record high of 18.6 million barrels a day in 2019, according to the EIA. It’s only down 3% since then. Meanwhile, Americans use less gasoline due to better fuel efficiency, more electric vehicles on the road and the rise of remote work.\n    \n\n            US gas prices rose quickly after the start of the Iran war in late February and have remained high, climbing more than crude oil prices.\n    \n\n            The national average price for gas on Saturday was $4.31 a gallon, according to data from AAA, the highest price on record for September. Diesel just crossed the $6-a-gallon mark for the first time on record. Jet fuel has been at its highest point since April.\n    \n\n\n\n\n\n\n\n\nA sign displays the price of unleaded gasoline at an Exxon gas station in Washington, DC, in May 2026. Gas prices have remained high since the start of the war in Iran are are at the highest level ever recorded in the month of September.\n\nAlex Wroblewski/Bloomberg/Getty Images\n\n\n\n\n\n            But don’t expect more US refineries to change that anytime soon.\n    \n\n            First and foremost, it takes at least three years to significantly expand existing oil refineries, even longer for a new one.\n    \n\n            Auers noted that even if a refinery has been designed and ready for environmental review, “you’re still looking at four to five years until it’s going to start producing.”\n    \n\n            Also, that extra capacity would need to be operational for decades for the investment to pay off. Uncertainty about future US regulations and demand makes such long-term investments risky.\n    \n\n            Excluding the pandemic, “gasoline demand this summer will probably be the lowest for a summer period since 2001,” said Kloza.\n    \n\n            “North America is the best continent to be a refiner at the moment, and probably for the next five to 10 years,” he said. “Beyond that, who knows?”\n    \n\n            That’s likely why oil companies are more interested in taking their current windfall profits and investing in oil exploration or pipelines, which have more immediate payoffs, or returning the money to shareholders.\n    \n\n            “They’re putting it back in (stock) buybacks and dividends,” said Auers. Even when oil companies such as Marathon and Phillips 66 invest their windfall profits back into their business, “most of their capital expenditures over the past few years have been in midstream (such as pipelines), not on the refining side. That’s because that’s where Wall Street wanted them to put their money.”","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":false,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"}}}