United States President Donald Trump on Friday responded by temporarily suspending the Jones Act for sixty days. This decision is part of an overall strategy to lower transportation costs for oil, gas and other life sustaining commodities nationwide. The U.S. is undergoing an inflationary shock in crude oil prices. U.S. crude recently hit $98 a barrel and Brent crude, the global benchmark, was trading at about $109 a barrel.
The Jones Act, officially known as the Merchant Marine Act of 1920, was enacted by Congress to revitalize the U.S. shipping industry after World War I. Generally speaking, the legislation mandates that any vessel carrying goods or passengers between U.S. ports must be constructed in the United States. Furthermore, these vessels need to be U.S. owned and mainly crewed by U.S. residents. Senator Wesley Jones of the then-nascent state of Washington originally sponsored the act. It was intended to make sure that when the country got into a conflict, we could depend on our own merchant fleet.
Implications of the Waiver
The waiver allows foreign-flagged vessels to move energy products and fertilizers between U.S. ports. This is especially important during this spring planting season, when fertilizer demand is at its highest. The White House touts this action as a way to increase supply. It aims to bring down other sector’s soaring costs.
“This action will allow vital resources like oil, natural gas, fertilizer, and coal to flow freely to U.S. ports for sixty days,” stated Karoline Leavitt.
The administration is right to recognize that increasing foreign participation in domestic waterborne transportation will improve supply chain logistics. This provision is intended as an efficiency supply increase. According to Patrick De Haan, “By waiving it, the government will make logistics a lot simpler, cheaper and easier for products to flow.”
Economic Context
The national average for regular unleaded gasoline has risen to $3.84 a gallon. In times of disaster, suspension of the Jones Act is an appropriate response that might provide consumers with needed relief. Experts warn that effect may not be as obvious at the pump right away.
It won’t make a visible difference at the pump immediately,” as noted by Patrick De Haan at Gas Buddy. Instead, it will simply counterbalance the escalating cost to consumers at the register. He calculates the waiver will prevent price increases of 3 to 10 cents per gallon. That’s about $0.007 to $0.02 per liter.
Washington was right to waive the Jones Act in order to provide relief from inflationary pressures. This action will help support stabilization of energy prices in a historically volatile global market. With oil prices surging and the geopolitical situation more unstable than ever, this temporary measure is a positive step that proactively retains and prevents vital resources from becoming scarce and more costly, delivering tangible benefits to consumers.
