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Energy supply matters, but so does the ability to move it where it’s needed. The disruption in the Strait of Hormuz has tested global energy markets and reinforced this important lesson.
This week’s American Energy Snapshot explores one of the tools the U.S. government is using to keep American energy moving amid tight global supplies: Jones Act waivers.
What is the Jones Act?
The Merchant Marine Act of 1920, commonly known as the Jones Act, is a law that requires most cargo shipped from one U.S. port to another U.S. port to move on vessels that are U.S.-built, U.S.-owned, U.S.-flagged and primarily U.S.-crewed. The law was passed after World War I to help ensure the U.S had ships, mariners and shipbuilding capacity available in times of war.
For energy, the Jones Act means that crude oil, gasoline, diesel, jet fuel and other products moving between U.S. ports must travel on Jones Act-qualified vessels.
The recent energy crisis disrupted many international shipping routes that supplied certain regions in the United States. But there weren’t sufficient Jones Act-qualified vessels to replace the disrupted routes with domestic supplies — that’s where waivers come in.
How the current waivers work
The Jones Act allows the federal government to issue temporary waivers in instances like national emergencies, natural disasters or major supply disruptions (like the Strait of Hormuz). These waivers allow foreign-flagged vessels to move cargo between U.S. ports.
According to data from the U.S. Maritime Administration, 109 waivers have been used so far.
Why waivers matter right now
The U.S. imports only about 8% of its crude oil from the Middle East, but certain regions are more dependent on imports and tightening global supply routes. California is a clear example.
As we explained in a recent edition, California and other West Coast states import a significant share of their jet fuel from South Korea. The conflict in Iran cut off much of the crude oil South Korean refineries rely on, which subsequently impacted jet fuel availability on the U.S. West Coast.
But Jones Act waivers gave West Coast states access to a new supplier — the U.S. In the waiver’s first 76 days, more gasoline and jet fuel moved from the Gulf Coast to the West Coast over water than in the last 11 years combined.
So far, the U.S. Gulf Coast has supplied 8 million barrels of gasoline, diesel, jet fuel and other refinery feedstocks to California by water, which has helped stabilize markets.
Why did the waiver extension matter?
Energy cargos are often planned weeks and even months in advance. Vessels have to be secured, and suppliers need certainty to plan shipments. A 30-day waiver can be helpful, but not long enough to plan many shipments.
During this disruption, the administration issued a waiver on March 18 for 30 days and later extended it for 90 days through August 17.
The extension provided the necessary lead time and the policy certainty that companies needed to keep energy supplies moving.
The takeaway
The U.S. has abundant energy resources, but energy security is also about whether that energy can be moved affordably and reliably.
The Jones Act waivers issued this spring have been a targeted, practical tool for doing exactly that — giving the system flexibility and getting American energy to American markets when it mattered most.
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