What the Jones Act does and how a Trump suspension could affect fuel prices

Source: Axios · Bias: Center Left

Summary

The Trump administration might suspend requirements that only U.S. ships can carry cargo between domestic ports as officials look to temper rising gasoline prices.Why it matters: Possible waivers of the 1920 law, the Jones Act, show how the Trump administration is scrambling to ease the fuel price shock from the Iran war.Officials are considering a 30-day waiver, Bloomberg reported.Context: The Jones Act requires that cargo transported by water between U.S. ports be shipped solely aboard vessels that are U.S.-built and citizen owned as well as registered under the U.S. flag and primarily crewed by Americans.It's the furthest-reaching coast-wise trade statute, per the Department of Transportation's Maritime Administration.Critics call it an antiquated law that hinders free trade, makes U.S. industry less competitive and has hiked prices for consumers.Driving the news: "In the interest of national defense, the White House is considering waiving the Jones Act for a limited period of time to ensure vital energy products and agricultural necessities are flowing freely to U.S. ports," press secretary Karoline Leavitt said in a statement.A White House official said the move wouldn't affect American shipbuilding.What we're watching: It's unclear how much waivers might affect gasoline prices that have climbed, per AAA data, roughly 60 cents per gallon since the strikes on Iran began. What they're saying: "It is helpful. It will provide relief," Colin Grabow, an associate director at the libertarian Cato Institute's Herbert A. Stiefel Center for Trade Policy Studies. "But I do think we should set expectations. It will be, probably, modest." He estimates that it would offset single-digit cents per gallon at the retail level (though, to be clear, Cato scholars have long argued the Jones Act has negative economic consequences). How it works: Grabow cites the opportunity with a waiver to more easily move petroleum products from the Gulf Coast to ports on the East Coast, which has higher fuel costs.But he cautions that "there are a lot of factors that shape the market," so retail prices could still rise because other forces swamp the effects of the waivers. Zoom out: The law, passed as part of the Merchant Marine act of 1920, is intended to support U.S. commercial activity and serve as a naval auxiliary in times of war or national emergency.Exemptions — granted in the interest of national defense — are rare. The law's passage after World War I "exposed how dependent the country was on foreign ships, and the goal was to maintain a merchant fleet strong enough to support both commerce and national defense," a LegalClarity report said. Catch up quick: The potential move comes amid other White House efforts to loosen energy markets as the Iran war stifles oil, petroleum product, and natural gas flows through the Strait of Hormuz off Iran's coast.The Energy Department on Wednesday announced plans to release 172 million barrels of oil from the U.S. Strategic Petroleum Reserve over roughly 120 days.It's part of a wider coordinated release of 400 million barrels among member governments of the International Energy Agency.The intrigue: Trump is able to authorize Jones Act waivers when qualified U.S.-flagged vessels aren't available to meet defense needs, per LegalClarity. Defense Secretary Pete Hegseth can request a waiver of the coastwise requirement when there's an immediate negative impact on military operations.Go deeper: Iranian oil squeeze tests Trump's war plans

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What the Jones Act does and how a Trump suspension could affect fuel prices
Axios

What the Jones Act does and how a Trump suspension could affect fuel prices

Center Left

The Trump administration might suspend requirements that only U.S. ships can carry cargo between domestic ports as officials look to temper rising gasoline prices.Why it matters: Possible waivers of the 1920 law, the Jones Act, show how the Trump administration is scrambling to ease the fuel price shock from the Iran war.Officials are considering a 30-day waiver, Bloomberg reported.Context: The Jones Act requires that cargo transported by water between U.S. ports be shipped solely aboard vessels that are U.S.-built and citizen owned as well as registered under the U.S. flag and primarily crewed by Americans.It's the furthest-reaching coast-wise trade statute, per the Department of Transportation's Maritime Administration.Critics call it an antiquated law that hinders free trade, makes U.S. industry less competitive and has hiked prices for consumers.Driving the news: "In the interest of national defense, the White House is considering waiving the Jones Act for a limited period of time to ensure vital energy products and agricultural necessities are flowing freely to U.S. ports," press secretary Karoline Leavitt said in a statement.A White House official said the move wouldn't affect American shipbuilding.What we're watching: It's unclear how much waivers might affect gasoline prices that have climbed, per AAA data, roughly 60 cents per gallon since the strikes on Iran began. What they're saying: "It is helpful. It will provide relief," Colin Grabow, an associate director at the libertarian Cato Institute's Herbert A. Stiefel Center for Trade Policy Studies. "But I do think we should set expectations. It will be, probably, modest." He estimates that it would offset single-digit cents per gallon at the retail level (though, to be clear, Cato scholars have long argued the Jones Act has negative economic consequences). How it works: Grabow cites the opportunity with a waiver to more easily move petroleum products from the Gulf Coast to ports on the East Coast, which has higher fuel costs.But he cautions that "there are a lot of factors that shape the market," so retail prices could still rise because other forces swamp the effects of the waivers. Zoom out: The law, passed as part of the Merchant Marine act of 1920, is intended to support U.S. commercial activity and serve as a naval auxiliary in times of war or national emergency.Exemptions — granted in the interest of national defense — are rare. The law's passage after World War I "exposed how dependent the country was on foreign ships, and the goal was to maintain a merchant fleet strong enough to support both commerce and national defense," a LegalClarity report said. Catch up quick: The potential move comes amid other White House efforts to loosen energy markets as the Iran war stifles oil, petroleum product, and natural gas flows through the Strait of Hormuz off Iran's coast.The Energy Department on Wednesday announced plans to release 172 million barrels of oil from the U.S. Strategic Petroleum Reserve over roughly 120 days.It's part of a wider coordinated release of 400 million barrels among member governments of the International Energy Agency.The intrigue: Trump is able to authorize Jones Act waivers when qualified U.S.-flagged vessels aren't available to meet defense needs, per LegalClarity. Defense Secretary Pete Hegseth can request a waiver of the coastwise requirement when there's an immediate negative impact on military operations.Go deeper: Iranian oil squeeze tests Trump's war plans

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