Jones Act Waiver Talk Highlights the Law’s Costs

By Colin Grabow of Cato. Excerpts:

"Although routinely defended as essential to national security, Jones Act waivers are often floated precisely when a genuine national security crisis or economic emergency arises. It’s an implicit acknowledgment by policymakers of what the law’s defenders rarely admit: It constrains transportation options and raises costs. A law portrayed as indispensable to national security suddenly becomes optional when pressures mount."

"Of the world’s nearly 7,500 tankers for moving crude oil and refined products, just 54 comply with the law. And those that do are dramatically more expensive than their international counterparts. Constructing a medium-range tanker suitable for carrying gasoline or jet fuel in a US shipyard costs roughly $190 million more than building one abroad. Building a crude oil tanker is said to cost over $400 million more. Annual operating costs run $8 million–10 million higher per vessel.

Combine those cost premiums with a minuscule fleet size and the result is predictable: Coastal tanker shipping in the United States is structurally expensive."

"By opening domestic routes to internationally flagged shipping, relief from the Jones Act would vastly increase the supply of vessels available to move American crude oil and refined products to US ports. That, in turn, would unlock new and more efficient supply chains."

"only a single Jones Act–compliant crude oil tanker currently serves the East Coast. With additional ships, US refineries could more easily source oil from Texas rather than import it from Libya or Nigeria. California, which currently imports fuel from the Bahamas as a costly Jones Act workaround, could obtain it more directly from the Gulf Coast."

"“if there was not a Jones Act, then there probably would be more movements of crude oil from Texas to Philadelphia.” The source of that quote? The same Jones Act tanker firm CEO who recently downplayed the benefits of waiving the 1920 law."

"Among liquefied natural gas tankers, only a single compliant vessel exists, and it is restricted to serving Puerto Rico. Among oceangoing dry bulk carriers, the workhorses of fertilizer transport, precisely zero exist in the Jones Act fleet."

"By the industry’s own admission, eliminating the Jones Act would increase domestic energy movements. That means fewer market distortions and more competitive pricing at the margin."