The Only Oil Stocks I’m Buying for the next Phase of the Third Gulf War

The Defense Production Act of 1950 was passed to give the president emergency powers over industrial production during the Korean War. 

And for 76 years, it’s been invoked for everything from military equipment, to medical supplies during COVID, and to semiconductor manufacturing.

But it was never really meant for gasoline… until now. 

Recently, President Trump invoked Section 303 of the Defense Production Act for domestic petroleum production, refining, and logistics capacity.

His official justification was understandable — to ensure resilient domestic petroleum production, refining, and logistics capacity that is so critical to U.S. defense readiness. 

Without immediate federal action, our defense capabilities would be “severely impaired.”

That may be the reason on the surface, but I want you to look a little deeper under the hood on this decision. 

Last week, the average price of gasoline hit $4.30 a gallon in the U.S.; diesel topped $5.80/gallon. 

If we know nothing else, it’s that the quickest way to end a war is through angry voters at the pump. 

For good or for worse, gas prices in the U.S. are the achilles’ heel for politicians. 

In a heartbeat, high gas prices can turn the tide at the voting booths and hand an easy win for democrats during the midterms. 

However, Trump’s order gave the Secretary of Energy sweeping authority to expand refining capacity — waiving regulatory requirements, expediting projects, and authorizing federal financial support. 

In effect, it declares inadequate refining capacity as a threat to national security.

In other words, U.S. refiners just got the green light to run full-speed with the backing of the federal government. 

And the timing couldn’t be more perfect. 

Why? Well, because we have a series of catalysts lined up that will drive the downstream players in the U.S. oil industry to new records. 

From the spring maintenance that is starting to wrap up, to the ramp-up of demand during the summer driving season that’s just a few weeks away… normally, this would be enough to turn us bullish. 

But now we can add another ace up their sleeve — global demand for crude and product from the U.S. Gulf Coast that’s spiking thanks to the ongoing (and seemingly never-ending!) dual blockades in place at the Strait of Hormuz. 

Of course, that’s not to mention the fact that crack spreads are at levels that print money. 

Trump just handed a small, elite group of U.S. oil stocks the setup of the decade.

Do you see it?

Look, here’s what matters right now…

Spring maintenance season just wrapped up. 

As you know, refineries operate on predictable cycles — they shut down units for planned turnarounds in spring and fall, avoiding peak summer driving demand and winter heating oil demand. 

This year, that spring maintenance season was lighter than usual, which means most Gulf Coast refineries are coming back online right as demand is about to explode.

ExxonMobil wrapped up turnarounds at Beaumont and Baytown in April. 

We know Marathon finished its work at its Gulf Coast facilities, and Valero’s running at high utilization rates after completing scheduled work. 

Even PBF Energy’s getting its Martinez refinery back to full rates after last year’s fire delayed the restart into early 2026.

Like I said, the timing couldn’t be better.

Remember, Memorial Day kicks off summer driving season in two weeks. 

That’s when gasoline demand spikes and stays elevated through Labor Day.

This year, however, it’s not just domestic demand refiners are feeding. Let’s not forget the conga line of empty tankers making their way to the Gulf of America right now. 

The thing is, the worst of the supply crisis hasn’t fully materialized yet because it takes time to develop.

Ships that were already loaded with crude and products before the war started had to deliver their cargoes. Now that those deliveries have been made, they can’t go back to load more thanks to the two active blockades in the Strait of Hormuz with no realistic peace deal in sight.

Meanwhile, Europe and Asia are scrambling for diesel and gasoline. 

So, our refiners along the Gulf Coast are among the few suppliers with the available capacity and logistics to deliver at scale. 

Export demand is spiking just as domestic summer demand ramps up.

And crack spreads — the refining margins that measure the difference between crude oil costs and refined product prices — are holding at levels that are absolutely printing money for refiners.

Last month, Gulf Coast 3-2-1 crack spreads averaged $41.75 per barrel. Although that’s slightly lower month-over-month, it’s nearly double from where they were a year ago.

Diesel crack spreads are particularly elevated — diesel prices averaged $61.42 per barrel in April, up 164% year-over-year.

Look, these aren’t normal margins. 

What we’re seeing are war-era margins, and they’ll hold steady because global diesel supply is structurally tight. 

The longer the Strait of Hormuz stays closed, the tighter they’ll get, too. 

But our refiners aren’t just benefiting from high product prices. 

We also have to factor in a relatively cheaper feedstock. I know WTI crude around $100/bbl sounds high, but not as elevated as refined products. 

The spread between what refiners pay for crude and what they get for gasoline and diesel is massive.

That’s where Trump invoking the Defense Production Act supercharges this setup. It gives refiners federal backing to maximize output without the usual regulatory friction. 

Need to expedite a project? No problem, because the DPA provides authority to cut through permitting delays. 

What about financing for capacity expansion? That won’t be an issue either because they’re now authorized federal purchases and financial commitments.

In fact, the order specifically calls out refining capacity as essential to national defense and frames inadequate refining capacity as a threat that would “severely impair national defense capability.” 

That’s not just rhetoric, dear reader, it’s legal authority to prioritize refining over almost anything else.

Trump’s message is crystal clear — run hard, max utilization, and we’ll have your back. 

That’s what makes those Gulf Coast refiners the must-own oil stocks for the next phase of the Third Gulf War. 

Now, this is the part the investment herd misses, because all they can see is Big Oil like Exxon — the integrated majors with refining operations as part of massive upstream-midstream-downstream portfolios.

But the real opportunity is in the independent refiners — the ones trading at valuations that don’t remotely reflect the margins they’re about to generate.

These aren’t the household names that the average person recognizes, and they don’t get anywhere near the attention that Exxon gets when CNBC starts jabbering about energy stocks. 

And yet, they’re the ones with the operating leverage to refining margins that’s about to pay off massively.

Valero Energy (NYSE: VLO) operates 15 refineries with a total capacity of about 3.2 million barrels per day, making it the second-largest refiner in the U.S. by capacity. 

Marathon Petroleum (NYSE: MPC) is the largest by volume, operating 13 refineries with roughly 3 million barrels per day of throughput. 

Then there’s Phillips 66 (NYSE: PSX), which runs a dozen refineries across the U.S. and Europe.

Now here’s the real kicker…

Each one is trading at valuations that are absurdly cheap relative to the earnings they’re generating.

Yes, they’re more attractive than Exxon right now. 

And that was before Trump invoked the Defense Production Act, before the summer driving season kicked in, and they’re fully supported by the weight of global export demand hit Gulf Coast refineries.

Of course, the market is still pricing these companies like it’s a normal refining environment.

These kinds of opportunities are hiding in plain sight, you just have to know where to look.