Anyone here know the politics/legality behind the defense production act?
After joe’s comments today, specifically this:
makes me think that he wants to invoke the defense production act for oil/gas if it can be legally done. The fact that there’s elections around the corner means that politics/public perception will play a big role in this as well.
I know that the DPA can be used to get factories to produce urgently needed goods, but can it be used to force companies to build new oil rigs and refineries? (Probably specifically refineries). The crack has indeed exploded since the start of the war, it’s more like a canyon now:
(This is the spread between a barrel of WTI Crude and a barrel of RBOB gasoline, it has NEVER been higher)
Realistically, even if joey can invoke the DPA to mandate more refining capacity and/or more drilling rigs, there won’t be any dividends from such projects for years, but because the market is fueled by speculation (remember that oil prices exploded immediately on account of the ukraine war even though the supply wasn’t cut immediately), if the DPA is invoked, there will likely be an immediate and large move downwards in both oil and the crack.
Regardless of the legalities of it, it takes a very long time to build and spool up a refinery for production. One of the main reasons why we do not have more domestic refining capacity besides the cost of the facility itself is the amount of red tape standing in the way of building refineries.
Short of handing oil companies blank checks and unlimited manpower while simultaneously waiving every regulation/impact study/other requirements, invoking the DPA to get more refining capacity would be nothing more than posturing, as the ‘problem’ will likely have resolved itself in one way or another by the time there was any meaningful impact.
