Updates to include industry opposition to the move and add context.
President Donald Trump has approved a 60-day waiver of domestic shipping requirements under the Jones Act in an attempt to ease a spike in commodity prices caused by the war in Iran, a move that is unlikely to significantly affect US gasoline prices.
The temporary waiver will allow shippers to transport crude, natural gas, natural gas liquids, fertilizer, coal and other energy-related products from one US port to another without using US-built, US-crewed and US-flagged ships, as the 1920 Jones Act requires. The waiver is meant to mitigate "short-term disruptions" to oil markets caused by the war in Iran, according to the White House.
Maritime labor unions in the US expressed strong opposition to the waiver when first proposed by the White House last week, saying it would have a limited effect on domestic gasoline prices since high crude prices — and not domestic shipping costs — are the main driver of gasoline prices.
"This waiver will not reduce gas prices," industry coalition American Maritime Partnership told Argus today. "The maximum potential impact of domestic shipping on the cost of gasoline nationwide is less than one penny per gallon."
The Jones Act waiver could make it easier for traders to transport the up to 172mn bl of crude the administration plans to draw down from the US Strategic Petroleum Reserve (SPR), starting as early as this week. The waiver will allow that crude to be shipped to other US ports without having to be loaded onto the small fleet of Jones Act-compliant tankers that are typically more costly to charter.
Trump's intervention into the cabotage requirements comes as domestic prices for fuel and fertilizer have spiked in response to attacks on shipping in the strait of Hormuz. US regular grade gasoline prices were $3.72/USG in the week ended 16 March, up from $2.94/USG before the US started military strikes on Iran.
"This action will allow vital resources like oil, natural gas, fertilizer, and coal to flow freely to US ports for 60 days, and the administration remains committed to continuing to strengthen our critical supply chains," the White House said.
The Jones Act can be waived at the request of the Secretary of Defense to the extent that they consider such a waiver is in the interest of national defense to address an immediate adverse effect on military operations. US Customs and Border Protection did not immediately respond to a request for comment seeking further details on the waiver.
The act has been waived briefly in the past, often following severe hurricane that required flexibility in getting energy supplies to different parts of the country.
The waiver will likely have limited effect on US natural gas flows as the winter heating season winds down, especially with shipping and supply disruptions from the US-Israel war on Iran creating much stronger margins for exporters of US LNG.
