Colin Grabow
War and economic turmoil have a way of focusing policymakers’ attention. Amid rising energy and fertilizer costs in the fallout from escalating conflict in the Middle East, the Trump administration is reportedly set to waive the Jones Act, the 1920 law requiring that domestic waterborne transportation be conducted on US-flagged vessels built in American shipyards.
It’s instructive. 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.
The Jones Act’s restrictions are particularly stark in the context of energy transportation. 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.
Unsurprisingly, defenders of the law have pushed back against the idea of a waiver. Most prominently, the CEO of a Jones Act tanker operator recently argued that because international tanker charter rates have surged amid the current crisis, allowing foreign-flagged ships into domestic trades would provide little benefit.
But such thinking misses the bigger picture. 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.
For example, 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.
This isn’t controversial. A 2017 Financial Times story included the observation that “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.
And the benefits of Jones Act relief go well beyond oil and fuel. 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.
Expanding the fleet of vessels capable of meeting domestic transportation needs would improve flexibility and reduce distortions in an economy under strain.
It’s important, however, to set realistic expectations. A waiver will not produce dramatic drops in fuel costs. Transportation is just one of many factors that determine prices at the pump, and the current price environment reflects global supply disruptions that no domestic shipping policy can fully offset. But it is equally wrong to claim a waiver would do nothing. 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.
There is no question about the directional impact of Jones Act relief, only the magnitude.
In a moment when Americans are facing elevated energy and input costs, policymakers should be willing to remove barriers that serve no purpose beyond protecting a small fleet of expensive vessels. A Jones Act waiver may not deliver dramatic price declines—only an end to the misguided US military action in Iran will do that. But it would expand capacity, enhance competition, and ease constraints in a stressed system.
There’s also a larger point to consider. If the Jones Act must be suspended to address national security emergencies, why do we keep it in place during times of peace? Why keep it around at all?