By Arathy Somasekhar
US refiners are not planning to make more ticket investments to process more domestic crude and less oil from top suppliers in Canada and Mexico, and industry sources and analysts are obstacles to President Trump’s plans to promote oil production.
Trump’s pledge to unleash US energy production and lower consumer prices focuses on increasing oil drilling across the country. At the same time, his tariff threat reduced crude oil imports from Canada and Mexico. This ultimately decided to exempt energy imports, but accounts for about a quarter of the refiner process in Petroleum America.
Uncertainty about future trade policies may make more domestic crude oil more attractive to US refiners, but the switch is not simple.
The United States produces mainly light shale crude oil. This would ideally require a different configuration than the dense Canadian and Mexican crude oil. Over 70% of US processing capacity is configured to run heavier grades, and changing the setup can be a long and expensive process.
Reuters spoke to 10 industry sources, including refinery staff, executives and analysts, for the story.
One refinery source that rejected the name said it had explored options for all companies to increase their progressive light crude processing capacity, adding that it would take years and cost hundreds of millions of millions.
“We have not made these investment decisions based on very short-term market fluctuations,” said Barbara Harrison, Chevron’s vice president of oil supply and trading. She added that the sixth largest US refinery by capacity is now happy with its refinery handling capacity.
“These investments don’t happen overnight. No construction happens. Permissions don’t happen overnight. So you need to make sure your investments are in line with the long-term market foundations,” she said.
The slower demand for gasoline due to the growth of electric vehicles and the increasing competition from refineries in other countries have already led to shut down US refiners rather than investing in reconstruction.
Independent refiner Phillips 66 in January is a 2025 gasoline forecast, demanding that petrol rise globally by 0.8%, with 0.2% in the US halting operations at 139,000 barrels (BPD) Los Angeles area plants in the second half of 2025.
Lyondellbasell Industries began permanently closing its 263,776 bpd Houston Oil Refinery earlier this year.
U.S. net crude imports fell 20% in 2025, the lowest since 1971, and the Energy Information Agency forecast in March, pointing to an increase in US production and a decline in refinery demand.
However, US oil output is expected to be primordial by the end of the decade despite Trump’s plans. This is a long-term layoff for refiners to build or modify the unit.
“Our view is that US light shale oil production will peak in the early 2030s,” said John Auers, managing director of Refined Fuels Analytics. “In contrast, we expect (global) heavy crude oil production to continue growing in the 2040s, so we don’t advise converting it to refiners.”
The big cost of time and money
Increased ability to run lighter crude business in medium-sized refineries could cost hundreds of millions of dollars, Auers and other industry sources said.
Exxon Mobil, the top US oil producer, paid $2 billion in 2023 to add a 250,000 bpd crude distillation unit to run light Permian shale oil at a refinery in Beaumont, Texas. The upgrade took four years. No. 2 oil producer Chevron completed a remodeling of its refinery in Pasadena, Texas at the end of 2024, expanding its lightweight crude physiological processing capacity from almost 15% to 125,000 bpd. This costs around $475 million, says Hillary Stevenson, senior director of market intelligence firm IIR Energy. Chevron declined to comment on the investment.
As North Dakota’s Bucken Basin and Western Texas Permian Basin and New Mexico’s shale fields produce light, rough flooding, refiners have already fused with heavy crude imported crude oil and heavy crude oil imported from the facilities.
But they are close to their limits in how much coarse they can mix, multiple sources said.
Some independent refiners with no upstream production, such as top refiners Marathon Oil and HF Sinclair, said in February that they could pivot from heavier crude oil to lighter alternatives amid tariff threats, but warned that it could affect the use of refinements and yields.
Lighter crude tends to produce more petrochemical-born raw naphtha, and produce more profitable diesel and jet fuel, which can force operators to reduce the rougher amounts of running overall.
“If heavy ingredients are limited, then there are certainly points that will affect the rate and production of clean products from our assets, and we’ll expect from the industry as a whole,” Valero Chief Operating Officer Gary Simmons said in February.
If tariffs cut crude supply in Mexico and Canada, refiners are likely to rely on other similar oil suppliers, such as Colombia, industry sources said.
“Companies need to have some certainty in their policies and long-standing regulations to make these large investments,” said IIR’s Stephenson.
“Four years are not enough to make such capital expenditures and investments,” she adds, referring to the length of the US president’s term.
(Reporting by Arathy Somasekhar of Houston, Editing by Peter Henderson, Simon Webb, and Marguerita Choy)
