Report: Trump temporarily exempts the Jones Act, authorizing foreign vessels to transport energy, aimed at stabilizing oil prices
On March 18, the Trump administration announced a temporary 60-day waiver of the Jones Act to address the surge in energy prices caused by conflicts in the Middle East, allowing foreign vessels to transport oil, natural gas, coal, and other commodities to ports within the United States. This move aims to reduce fuel transportation costs on the East Coast. However, analysts point out that the closure of the Strait of Hormuz has disrupted the supply of 15 million barrels per day, which the International Energy Agency has termed "the largest supply disruption in history," indicating that adjustments to domestic policy alone have limited effects
The situation in the Middle East impacts global energy supply, and the White House has introduced a 60-day exemption measure, but analysts say the effect is limited.
On March 18, Bloomberg reported that Trump signed an executive order on Wednesday temporarily exempting the century-old Jones Act, allowing foreign-flagged vessels to transport various bulk commodities, including oil and natural gas, between U.S. domestic ports for the next 60 days. This move is one of the latest measures by the White House to respond to the surge in energy prices triggered by the Middle East conflict.
White House Press Secretary Karoline Leavitt stated in a statement that this exemption aims to alleviate short-term volatility in the oil market and maintain the energy supply chain, which is crucial for national security. The exemption is expected to reduce transportation costs for crude oil from the Gulf Coast to East Coast refiners and ease price pressures in the Northeast refined oil market.
First Easing of the Century-Old Jones Act: Foreign Vessels Allowed to Participate in U.S. Energy Transportation
According to details of the authorization revealed by White House officials, the exemption applies to a range of commodities including coal, crude oil, refined oil, natural gas, natural gas liquids, fertilizers, products primarily made from refined oil, and other energy derivatives.
The Jones Act, enacted in 1920, requires that goods transported between U.S. domestic ports must be carried on vessels that are flagged in the U.S., built in the U.S., and owned by U.S. citizens, with the original intention of supporting the domestic shipbuilding industry. This exemption temporarily lifts the aforementioned restrictions, allowing foreign vessels to participate in relevant shipping routes.
James Lucier, managing director of research firm Capital Alpha Partners, pointed out that the Jones Act previously made the cost of transporting gasoline from the Houston shipping channel to New York Harbor and other East Coast destinations prohibitively high, leading to a significant amount of cheap gasoline refined from U.S. crude oil being exported to Mexico instead of supplying the domestic market.
A Drop in the Bucket? Analysts Say Jones Act Exemption Hardly Mitigates Global Supply Shock
Trump's exemption decision is part of a series of measures he has recently taken to address rising energy prices. The conflict in the Middle East has effectively closed the Strait of Hormuz, obstructing about 15 million barrels per day of oil supply, severely impacting the global energy supply chain and causing significant turbulence in financial markets.
The International Energy Agency has characterized the supply disruptions caused by this conflict as "the largest supply disruption in the history of the global oil market." Against this backdrop, some analysts believe that the buffering effect of a single domestic transportation policy adjustment is very limited and unlikely to fundamentally fill the supply gap.
In addition to energy products, this exemption may also lower transportation costs for fertilizers along the Mississippi River. However, some analysts expect that the timing of the exemption may be too late to effectively alleviate agricultural production cost pressures during the key spring planting window for major crops
