America Lifted Its Self-imposed Energy Blockade. Here’s What Happened.

The Trump administration has waived the Jones Act for the past 100 days, and something remarkable has happened. Long-dormant U.S. energy supply chains have come to life. Ships transported jet fuel from America’s East Coast to the West Coast for the first time in nearly two decades. Bulk propane shipments reached Puerto Rico from Texas and Pennsylvania for the first time ever. Hawaii bought gasoline from Texas, and Alaska imported jet fuel from Louisiana. Ohio shipped fuel across the Great Lakes to Wisconsin.

Such commerce should happen frequently in our vast, energy-rich country, but the Jones Act handicaps shipping. The law requires that goods transported between U.S. ports travel on American-built, American-flagged, American-owned and American-crewed vessels.

That makes domestic water shipping enormously expensive. U.S. vessels cost four to five times more to construct than foreign-built equivalents, and U.S.-flagged ships are over four times more expensive to operate. Compliant vessels are also in short supply. Of the world’s roughly 7,500 oil tankers, fewer than 60 are Jones Act-eligible. As a result, importing oil and fuel from halfway around the world is often cheaper than buying from domestic sources.

In mid-March, during the early weeks of the Iran war, the Trump administration suspended the Jones Act for ships transporting energy products and fertilizer. The move was a tacit acknowledgment of what economists and shippers have long known: The law imposes real costs on the American economy. The waiver initially expired after 60 days, but it was later extended for another 90, through Aug. 16. It constitutes something close to a controlled experiment in economic policy. And the results are striking.

I analyzed the shipping data since the waiver was enacted. In the roughly 90 days tracked, vessels operating under the waiver moved roughly 30 percent more oil and petroleum to the West Coast than Jones Act vessels move annually. More jet fuel shipped from the Gulf Coast to the West Coast than all recorded shipments between the regions in the last 27 years. In the waiver’s first 80 days, 49 percent more propane reached Puerto Rico from the mainland United States than over the past 22 years combined.

None of this should be surprising. The closure of the Strait of Hormuz may have deepened the domestic appetite for U.S. energy, but that demand always existed. The CEO of Overseas Shipholding Group — a Jones Act tanker company — admitted in 2017 that without the law, “there probably would be more movements of crude oil from Texas to Philadelphia.” That is exactly what has happened, with roughly 5 million barrels flowing from the Gulf Coast to the East Coast under the waiver.

Increased domestic commerce also has led to fewer imports. Energy company Phillips 66 noted on an earnings call that the waiver has allowed it to replace imported crude with U.S. supplies. Before it began buying U.S. propane under the waiver, Puerto Rico imported from Chilean Patagonia. Buying American wasn’t an option because the Jones Act fleet has no vessels that would carry it in bulk from the U.S. mainland. The White House should be thrilled with the results. For an administration that calls itself “America First,” making it easier to buy American energy is an easy layup.

The waiver’s biggest losers are not overseas suppliers but Jones Act supporters. Their claims that loosening the law would flood American waters with Chinese ships have not held up. After more than 130 completed voyages, vessels with China or Hong Kong ownership or management have thus far accounted for roughly 10 percent of waiver activity. Just one Chinese-flagged vessel has participated. The parade of horribles has not materialized. Safety concerns have proved similarly misplaced. The Jones Act fleet averages 17.6 years of age, while the waiver vessels are half as old, averaging 8.8 years.

Perhaps most significant is what hasn’t happened: No Jones Act tanker has gone idle. No American maritime worker is unemployed because of the waiver. Domestic shipping has more capacity than it had before.

In economics, deadweight loss refers to the societal benefits that never occur because commerce is artificially depressed. For more than 100 days, the waiver has recovered a small piece of that loss. Fuel moved, and shipping costs fell. The sky did not.

Now imagine the broader benefits from the Jones Act being repealed or substantially reformed. American farmers could move their crops on competitive terms; Great Lakes manufacturers could ship goods at lower costs; and American consumers wouldn’t have to pay a premium for energy.

Congress can make these changes permanent. Unless it acts, the waiver expires in mid-August, the new supply chains dissolve, and the country returns to shooting itself in the foot — by law.