Antiquated law cost US millions in higher fuel charges

William Shughart II:

An obscure 1920 law is costing Americans billions of dollars a year in higher fuel costs.

The Jones Act requires that cargo shipped from one US port to another be carried on a US-registered vessel, built, owned and crewed by Americans. This protectionist law was designed to support a shipbuilding industry that no longer exists — but inertia and labor-union muscle keep it on the books.

The law mainly makes the news in time of crisis. It delayed shipment of road salt to New Jersey during a shortage last winter — happily, without incident, as the weather moderated before the Garden State had to shut down its highways for lack of salt.

In some crises, the president grants a waiver to allow emergency relief. President George W. Bush waived the Jones Act for a short time in 2005 after Hurricane Katrina hit the Gulf Coast; President Obama granted waivers to speed the release of strategic oil reserves (to counterbalance the loss of Libyan oil) in 2011 and most recently to get more gasoline into East Coast markets in the aftermath of Hurricane Sandy.

But every day the law adds to energy bills because it stops foreign-flagged tankers and barges from shipping among US ports. They can’t help move crude from Gulf Coast ports to East Coast refineries, or supply Florida with oil from Louisiana and Texas ports or ship oil between West Coast and Alaskan ports.

Without the Jones Act, in short, we’d have significantly greater domestic oil production.

The vast majority of Jones-compliant tankers are tied up in long-term charters. That leaves little tanker capacity available to, for example, ship the huge amounts of unconventional “tight oil” now being produced by fracking in North Dakota and south Texas. Only one pipeline supplies critically important refineries in the mid-Atlantic region, and the US rail-freight industry lacks the capacity to make much of a difference.
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This law needs to be repealed.  It is currently supported by unions and other rent seekers to the detriment of most Americans.  It is just not a smart idea.  At a time when foreign tankers are sitting idle because of fewer imports to the US we should be taking advantage of lower rates to ship our product among ports.