What exactly does this law provide: the president can expand the production of certain types of products if he considers it necessary for national security. The mechanism is rare and has historically been used in wartime and during crises - the act itself was passed in 1950 for the needs of the Korean War.
The main practical point is money. The Pentagon gets the right to spend funds on developing the US oil industry bypassing the usual restrictions and without standard notifications to Congress. That is, the approval procedure that usually slows down such spending for months is simply circumvented here.
The stated goal is fighting fuel prices. The logic is straightforward: more production and refining within the country means less pressure on the price of gasoline for the American consumer.
For a trader, the signal itself is what matters here. The US administration is moving oil from the category of a "commercial commodity" to a national defense matter, and that is already about political intervention in supply. Any attempt by the state to influence production volumes is a factor that sits in the oil price alongside geopolitics and OPEC decisions.
A separate point is bypassing Congress. Decisions of this type are made quickly and without lengthy public discussion, which means the market learns about them after the fact, not in advance.
Were you holding oil when this news came out?
Oil can open somewhere other than where you left it: one decision by the White House, and quotes move before you've had time to read the headline. The question is always the same - how many contracts you have under that candle. In prop trading, the trading nominal is provided by the company: you pay for the evaluation stage, work within its risk limits, and receive a share of the profit. Understanding this mechanic is easier in a calm market than on the day of the next such decree.