With average gasoline prices topping $4 per gallon and diesel closing in on all-time highs of $5.80 in wake of the Iran conflict, the White House recently called the nation’s top refiners to Washington to discuss capacity and prices.
After the meeting, an administration official told the Wall Street Journal:
“The President made clear that he wants lower gas prices at the pump for Americans. The refiners and distributors shared that goal and commitment.”
It was a conversation worth having. But to fully understand the challenge, it helps to look at how fuel prices actually work and why the factors that drive them extend well beyond any single company, meeting, or policy action.
Pump Prices 101
Gasoline prices are not set by refiners. They are driven primarily by the global price of crude oil, which accounts for the largest share of what consumers pay at the pump.
Refining costs and profit margins represent a much smaller slice of the final price. Refinery margins, known in the industry as “crack spreads,” are notoriously volatile and respond to supply, demand, seasonal factors, and global disruptions.
The current crack spread of $100 per barrel oil reflects the extraordinary market stress created by the Iran conflict and the loss of global refining capacity following Ukrainian drone attacks on Russian plants, not a reflection of industry profiteering.
Speaking on Fox Business after the White House meeting with refiners, Senator Bill Cassidy (R-LA) described the situation clearly:
“…the problem is there’s a global shortage of oil and a global shortage of refined products, and it all started with the war. Until the war is over, we’re going to be faced with the problem.”
Years of Policy Choices Have Consequences
Today’s tight refining picture did not appear overnight. Refinery capacity in the United States has been shrinking for years, and policy decisions have accelerated that trend.
California illustrates how policies that discourage investment in traditional energy infrastructure can create unintended consequences for consumers. Over the past five years, the state has lost roughly 30 percent of its refining capacity while increasingly relying on imported refined products to meet demand.
Regulatory pressure, low-emissions mandates, and an increasingly hostile permitting environment have pushed refiners to close or convert facilities rather than invest in expanding capacity.
As EID noted in a previous analysis of refinery capacity trends, these closures were years in the making — the product of sustained regulatory and financial pressure, not sudden market shocks. That context matters now, because the capacity that was lost then cannot be recovered quickly.
The trend is not limited to California. According to the Energy Information Administration, total U.S. refining capacity fell to approximately 18.2 million barrels per day in 2026, down more than 250,000 barrels per day from the previous year following major refinery closures in California and Texas.
Still, demand for refined products remains strong – putting increasing pressure on the remaining domestic refineries to meet consumer needs.
Refineries Are Already Running Flat Out
The White House meeting brought together Marathon Petroleum, Phillips 66, Chevron, Delek US Holdings, PBF Energy, and Valero Energy, some of the largest refining companies in the country. A key goal of the discussion was identifying ways to increase refining capacity and help bring down fuel prices.
The problem is that there is very little room to do either quickly.
According to recent EIA data, U.S. refineries have been operating at more than 97 percent of capacity in recent weeks, one of the highest utilization rates seen in roughly eight years. That is a testament to the industry’s commitment to keeping fuel flowing under difficult conditions.
At the same time, the nation’s largest refining companies are finding only limited opportunities to expand capacity. Marathon, Valero, and ExxonMobil each reported capacity increases of less than 1 percent this year, largely reflecting operational improvements rather than major new refinery construction.
Major capacity increases – or even the construction of new refineries – are multi-year, multi-billion projects, requiring layers of permitting and regulatory approval. Robert Campbell, an energy analyst, explained to the Wall Street Journal why such investments are less economical than they might seem:
“Nobody’s going to go out and make a huge multibillion-dollar investment based on three months of record margins.”
Energy commentator David Blackmon pointed out that America First Refining, the first new “greenfield” refinery to be built in nearly fifty years, took seven years to obtain required permits from the EPA and Texas regulators.
Maintenance and Storm Resilience Are Not Optional
Sustaining this level of output for an extended period requires careful management. These are complex industrial facilities that require scheduled downtime for maintenance and safety inspections.
Several refiners have reportedly delayed planned maintenance to maximize fuel production during the current supply crunch. Deferring that maintenance, as many operators have done to keep fuel flowing, is not a long-term solution.
Seasonal stocks of diesel and home heating oil are already at historic lows. Several major planned maintenance windows are approaching, including at the sprawling St. John refinery in northeastern Canada — and as political risk consultants recently noted, those outages are likely to pull prices even higher absent de-escalation in the Middle East.
The market’s vulnerability does not stop there. Gulf Coast refining infrastructure, which processes a significant share of U.S. fuel supply, remains exposed to storm disruption during hurricane season and even more so during this year’s “super El Niño.”
History offers a clear warning: Hurricanes Katrina and Rita in 2005 knocked out about one-third of U.S. refining capacity, causing gasoline prices to surge and underscoring the value of maintaining a robust refining system with sufficient capacity to absorb major supply disruptions.
The bottom line: Fuel prices today are shaped by overlapping forces: the price of crude oil, global refinery capacity constriction, and state and federal policies. The White House’s focus on refining capacity reflects the growing importance of refining to both energy security and fuel affordability. Addressing the industry’s long-term health will require permitting reform, regulatory clarity, and policies that support investment in domestic energy infrastructure.
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