New Report: Declining U.S. Refining Capacity Threatens American Energy Dominance & Economic Independence

New Report: Declining U.S. Refining Capacity Threatens American Energy Dominance and Economic Independence

U.S. Must Strengthen Domestic Refining or Risk Ceding Strategic Leverage to Foreign Competitors 

Washington, D.C. — America’s refining sector — a critical pillar of economic strength, military readiness, and global energy security — is facing mounting structural challenges that threaten U.S. energy security, according to a new report from the American Council for Capital Formation (ACCF). The report, Challenges Facing U.S. Refining: Risks to American Energy Dominance and Economic Independence, authored by ACCF President and CEO George David Banks and submitted to the Louisiana Department of Conservation and Energy, finds that while the United States remains one of the world’s leading crude oil producers, its downstream refining capacity is eroding in ways that could leave consumers, industry, allies, and national defense increasingly exposed to foreign leverage.
“Energy dominance is more than just producing crude oil.  It is about turning that resource into the fuels, petrochemicals, and strategic materials that power the economy and strengthen national security,” said Banks. “America’s refining system is one of our greatest strategic assets, but that advantage is no longer guaranteed. Without policy recalibration, the United States risks ceding supply resilience and geopolitical influence to foreign competitors.”

The report warns that U.S. refining capacity has stagnated and declined in key regions even as domestic crude production has reached record levels. Since 2019, more than one million barrels per day of refining capacity has been permanently lost, with additional closures and conversions underway, particularly on the East and West Coasts. At the same time, remaining U.S. refineries are operating near full utilization, leaving limited spare capacity to absorb weather events, infrastructure failures, or global supply shocks.

The report also highlights a structural mismatch in U.S. energy markets: roughly 70% of U.S. refining capacity is optimized for heavy, sour crude, while domestic shale production is overwhelmingly light, sweet crude. As a result, the United States exports large volumes of domestic light crude while importing heavier grades needed to keep complex refineries operating efficiently.

Foreign competitors are moving aggressively to expand their refining capacity. China has built a state-directed refining system rivaling U.S. scale, tightly integrated with petrochemicals and manufacturing supply chains. India has emerged as a major refining exporter by exploiting sanctions-driven discounts on Russian crude, gaining cost advantages over U.S. refiners. Across the Middle East, Africa, and Latin America, state-backed refinery projects are reshaping global fuel flows and threatening U.S. export markets.

The report’s topline findings include:

• U.S. refining is strategic infrastructure. American refineries convert domestic resource abundance into fuels, petrochemical feedstocks, and military-critical products essential to economic and national security.
• Domestic capacity is eroding. More than one million barrels per day of U.S. refining capacity has been lost since 2019, with additional closures and conversions reducing conventional fuel capacity.
• Crude quality mismatches create vulnerabilities. U.S. shale production is largely light, sweet crude, while many Gulf Coast refineries are optimized for heavier grades that must be imported.
• Foreign competitors are expanding aggressively. China, India, and state-backed refiners in other regions are increasing capacity, capturing market share, and using policy advantages to pressure U.S. refiners.

Policy pressures are accelerating decline. Layered regulations, permitting barriers, infrastructure constraints, and demand uncertainty are deterring investment and making new refinery construction unlikely.  To protect U.S. energy security and preserve downstream industrial strength, the report calls for:

1. Securing reliable access to heavy sour crude that matches existing U.S. refinery configurations, including expanded flows from strategically important suppliers.
2. Streamlining regulatory burdens that raise compliance costs, discourage investment, and accelerate refinery closures.
3. Removing infrastructure bottlenecks that distort domestic energy markets and limit the ability to move crude and refined products efficiently.
4. Refocusing trade policy to counter unfair foreign refining advantages, protect domestic producers from subsidized imports, and preserve access to necessary feedstocks.
5. Integrating refining into a broader U.S. manufacturing and energy security strategy that recognizes its foundational role in petrochemicals, advanced materials, industrial competitiveness, and national defense.

“Refining is the value-added manufacturing linchpin that turns American energy abundance into economic power,” Banks concluded. “Targeted reforms can stabilize domestic capacity, defend U.S. global leadership, and secure the downstream backbone of American energy dominance.”

READ THE FULL REPORT: Challenges Facing U.S. Refining: Risks to American Energy Dominance and Economic Independence

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