By Adam Ferrari, CEO of Phoenix Energy
As geopolitical tensions and concerns over shipping routes in the Middle East and other key oil-producing regions contributed to upward pressure on global crude oil prices during the spring of 2026, many Americans became concerned about how those developments could affect the cost of living and everyday life.
Periods of market uncertainty are also a reminder of why American energy independence remains important. American energy independence doesn’t just come down to how much oil we produce. Producing oil is the first step, but where crude oil is refined and the petroleum products that refineries are designed to produce are all important parts of the equation.
Today’s energy markets remind us that oil production, transportation, and refining are all part of one interconnected system. Ongoing concerns regarding the Strait of Hormuz have highlighted how quickly uncertainty can affect global energy markets. The issue isn’t just access to crude. It’s also where and how crude can be processed into usable products when supply chains face disruption.
The first requirement for energy security is producing enough crude oil domestically. Without a healthy upstream industry drilling and producing new wells, there would be nothing for refineries to process. But production alone isn’t enough. The crude also needs to move through pipelines, storage facilities, and refineries before it reaches consumers as usable fuels.
The U.S. produces a significant amount of the world’s oil supply. Based on the EIA’s 2026 outlook, U.S. petroleum and other liquid fuels production accounts for about 22% of global output, making the U.S. the world’s largest producer. But crude isn’t the end product as it has to be processed into usable products like gasoline, diesel, and jet fuel. Producing end products requires specialized refineries. Refining capacity refers to the amount of crude oil refineries are capable of processing over a given period and the types of crude those facilities are designed to handle.
Not all refining capacity is created equal. Some refineries are limited to basic distillation, while more complex facilities can process heavier crude more efficiently. That distinction matters because capacity, configuration, and location all influence how much usable fuel can actually reach the market.
It’s also important to recognize that not all types of crude and refining capacity are perfectly aligned. The U.S. has built one of the world’s most sophisticated refining systems over many decades. Many Gulf Coast refineries were optimized to process heavier crude because of historical supply patterns. At the same time, shale development dramatically increased production of light sweet crude. The result is a highly integrated market where imports, exports, and blending all help match different crude types with the refineries designed to process them.
When global supply chains are disrupted, countries with domestic refining capacity are in a more advantageous position than those that rely more heavily on imported refined products or foreign processing.
When there are disruptions, some parts of the world are more affected than others because of refining capacity, or a lack of it. Europe has been structurally short on middle distillates like diesel and jet fuel and relies on imports to meet its domestic needs. Recent disruptions tied to conflict in the Middle East have pushed European refined product markets to elevated levels. When disruptions hit, prices can move up quickly because they don’t have enough domestic refining capacity to absorb the shock.
The U.S. is generally better positioned than our European counterparts in regard to domestic energy production. We’ve seen modest increases in throughput and refinery utilization in recent years, along with higher production of key transportation fuels. That has contributed to the U.S. meeting domestic demand while also continuing to export refined products into global markets.
That doesn’t mean the U.S. is without price increases “at the pump” (or in the air or at the checkout line). Many energy commodities are still priced in a global market, and when global prices rise, those costs often flow through to consumers regardless of where the barrels are produced or refined.
With domestic refining capacity, the U.S. is better insulated from price fluctuations than some other countries, but not immune to them.
One important consideration is not just access to crude oil, but also where and how that crude can be refined into usable products when supply chains are disrupted. Recent EIA outlooks still point to robust global production and the potential for supply to exceed demand as disruptions ease.
Energy security isn’t determined by any single part of the industry. It depends on the entire system working together. From drilling new wells and transporting crude oil to refining it into fuels, this entire system powers homes, businesses, farms, airlines, and manufacturing. Periods of geopolitical uncertainty remind us that each link in that chain plays an essential role.
This article is provided for general informational purposes only and reflects the author’s views based on publicly available information as of the date of publication.
— Adam Ferrari is CEO at Phoenix Energy. He has nearly 20 years of experience in the oil and gas industry, following receipt of his bachelor’s degree in Chemical Engineering, magna cum laude, from the University of Illinois at Urbana-Champaign. He began his career with BP America in the Gulf of Mexico, then spent a stint in investment banking at Macquarie Capital, before transitioning back to the operating side with the then-start-up Halcón Resources Corporation. Following his tenure at Halcón, Adam pursued entrepreneurial opportunities in the mineral acquisitions side of the oil and gas industry, which ultimately led him to Phoenix Energy.
