U.S. Jones Act waiver delivers limited relief for gasoline prices

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Jones Act waiver & gas prices

Highlights

Refiners used the Jones Act waiver about 50 times in two months, moving 2.6 million barrels of crude and 7.5 million barrels of products, a small share of national consumption.
Shipping fuel on foreign-flagged vessels saves just 6.6 cents a gallon to California—about 1% of state pump prices—while Jones Act tankers remain cheaper to the East Coast in some cases.
California received 3 million barrels, or 2.1 million gallons per day, under the waiver—only 6% of state daily consumption—with total U.S. waiver shipments at 84,000 barrels per day against 8.75 million barrels per day demand.

Waiver use remains limited amid high tanker costs

As reported by Reuters, President Donald Trump's March waiver of the Jones Act is giving refiners wider access to foreign-flagged vessels for fuel shipments between U.S. ports, but elevated freight rates and limited cargo volumes are restricting the policy's effect on retail gasoline prices.

The century-old law requires goods moved between U.S. ports to travel on ships that are built, owned and crewed by Americans. Trump suspended the rule to help move crude and refined products from Gulf Coast refiners to the East and West coasts, which depend partly on imports because local refining capacity and pipeline links do not fully cover demand.

Federal data show that during the first two months of the waiver, refiners including Valero and Phillips 66 use the exemption about 50 times, moving 2.6 million barrels of crude and 7.5 million barrels of gasoline, diesel and jet fuel. Even so, those shipments account for only a small share of national consumption, while foreign-flagged tanker rates stay high because many vessels are trapped in the Strait of Hormuz.

AAA says the national average gasoline price stands at $4.49 a gallon, versus less than $3 before the war, while California averages $6.11 a gallon. According to Argus, shipping fuel from the Gulf Coast to the West Coast on an international tanker saves about 6.6 cents a gallon compared with a Jones Act vessel, equal to roughly 1% of current California pump prices; on the East Coast, strong demand for foreign ships in Asia means Jones Act tankers are actually cheaper in some cases.

Market impact and shipping shifts raise new concerns

California receives more than 60% of the gasoline and blendstock cargoes moved under the waiver, about 3 million barrels, or 2.1 million gallons a day. That equals roughly 6% of the 36 million gallons consumed daily in the state, while combined waiver shipments nationwide total about 84,000 barrels a day against U.S. demand of 8.75 million barrels a day.

The White House says data compiled since the waiver began show that more supply is reaching U.S. ports faster, and administration officials remain open to extending the measure if needed. Jennifer Carpenter, president of American Maritime Partnership, argues the waiver is not materially increasing fuel flows or reducing prices, while Cato Institute's Colin Grabow says repeated use of the exemptions shows foreign vessels are the lowest-cost option available in many cases.

Industry specialists say lower international tanker rates in coming weeks could lead companies to use the waivers more often. The measure is also reshaping trade patterns, with at least one U.S. tanker carrying Alaskan crude to South Korea in April, its first recorded international voyage since 2014, and Valero recently seeking a Jones Act tanker for fuel shipments to Mexico, developments that raise concerns about tighter domestic vessel availability.

Our earlier article on easing oil’s “war premium” covered how hopes of a temporary Iran agreement pushed WTI sharply lower as traders began to price in a return to more normal traffic through the Strait of Hormuz. It also noted that Hormuz remains the key chokepoint for oil, inflation and global trade, with markets balancing de-escalation hopes against the risk that any deal could still unravel.

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