US coaxing refiners to produce more diesel as prices surge, energy officials say

TITUSVILLE/HOUSTON: Two top US Energy Department officials said on Tuesday they were working with refiners at home and abroad to boost fuel output as a diesel shortage has raised prices, driving dissatisfaction among voters with the White House ahead of the November midterm elections.

Diesel prices have jumped to record highs because of disruptions from the Iran war and Ukrainian attacks on Russian refineries . Retail diesel prices averaged about US$6.32 a gallon on Tuesday, according to motorist group AAA.

The Trump administration has taken several steps to try to lower fuel prices that have surged since the start of the Iran war on Feb 28, including relaxing restrictions on Russian diesel exports, invoking the Defense Production Act to boost output and allowing commercial vehicles to run on red-dyed diesel normally limited to off-road equipment.

Diesel is critical to the global economy, powering much of the transport, agriculture and heavy industry that underpin global trade and economic activity. The high cost of fuel has soured voters on US President Donald Trump's stewardship of the economy, with 36 per cent approving of Trump on that issue, according to the most recent Reuters/Ipsos opinion poll.

"We are talking about reopening every refinery we can," Energy Secretary Chris Wright said in Houston. "There are dialogues there, and that's a tough challenge. I'm not saying all these are going to happen."

DIFFICULT TO RAISE US OUTPUT

US refineries are running near full capacity, and with several facilities shutting in recent years, there is little leeway to quickly boost domestic output, analysts say.

Refinery expansions are capital intensive and take months, if not years, to complete depending on the complexity of the additions.

Wright said the US is also working with India to increase refining output there to bring products to global markets.

American Petroleum Institute chief executive officer Mike Sommers told Reuters on the sidelines of an energy forum in Titusville, Pennsylvania that US refiners are running at 95 per cent to 100 per cent of capacity. He said they are putting off planned maintenance because of high prices.

"The American refiners are doing everything they can," Sommers said. He said that using the Defense Production Act to restart idled plants, as the administration has floated, would require a lot of capital.

Last week, Vice President JD Vance said the administration would use the Defense Production Act to expand capacity of a Texas refinery owned by Delek US Holdings.

Trump signed legislation last year that included US$1 billion in Defense Production Act funding for energy-related projects deemed critical to national security.

Wright said there was "more to do" on refining and the Defense Production Act but did not provide additional details.

Sommers singled out China's spare refining capacity, saying their government is currently barring diesel exports. Beijing "is really going to be the key if we're going to get long-term prices down," he said.

A spokesperson for theChinese embassy in Washington said the key to resolving the issue is to achieve a ceasefire in Iran. "China stands ready to maintain communication with all sides to jointly safeguard global energy security and keep industrial and supply chains stable," the spokesperson added.

PUSH FOR EUROPEAN DIESEL

Trump temporarily waived sanctions this month on Russian diesel in an attempt to lower prices. Russian diesel will likely move to New England, if it moves to the US at all, Wright said. Already, cargoes from Russia are returning to their traditional destinations after the US suspended sanctions, with two tankers signaling trips to Turkey and Brazil in recent days, Reuters reported on Tuesday.

The Trump administration has also been pushing Europe to release more fuel to balance global markets.

"We are working with our friends ... to find new and innovative ways to get more throughput" through refineries, said Energy Department Under Secretary Kyle Haustveit at the Drake Forum in Titusville.

While the Trump administration has pushed Europe to release 50 million barrels of diesel, an agreement by industrialised nations fell short of that target. The Paris-based International Energy Agency (IEA) said last week it would speed the release of crude ​and oil product volumes pledged in March, including more than 20 million barrels of diesel as soon as possible.

Fatih Birol, chief of the IEA, which coordinates industrialised nations' releases ​of oil from emergency stocks, said on Tuesday the group ‌is ready to coordinate more oil releases by member countries if needed.