Faculty Journal Articles and Book Chapters

Repeal the Jones Act for American Energy

Abstract

The antiquated Jones Act is preventing Americans from receiving energy produced by American innovation in oil and gas production. It places limits on shipping oil and gas to customers in U.S. ports, forcing American companies to send low-cost oil and gas to consumers abroad. The Jones Act raise prices for American consumers and American companies and should be repealed for shipments of oil and gas and energy equipment.

The Merchant Marine Act of 1920, colloquially known as the Jones Act, requires that shipments between two U.S. ports be on U.S.-built, U.S.-manned, and U.S. owned vessels. There is no such requirement when a shipment goes from a U.S. port to a foreign port or vice versa — any ship can make that trip. As a result, when there is a spike in demand for sea transport, there is often a shortage of U.S.-built ships to move products from U.S. sellers to buyers in a U.S. port, and it is much cheaper to simply ship U.S. products to foreign buyers in foreign ports.

This problem is particularly acute in rapidly shifting energy markets: as a result of the recent U.S. oil boom, it now costs three times as much to ship oil from Texas to refineries on the U.S. East Coast as it costs to ship oil further to refineries in Canada.3 In the coming decades, North American energy markets will keep shifting more and more rapidly as a result of new technologies and increasing international trade in energy. The Jones Act will prevent American companies from adapting to these shifts because it takes years to build new ships and train new workers. So while the rest of the world will be able to respond to changing markets, U.S. energy producers will be held back.

Document Type

Report

Keywords

jones act, domestic energy production, foreign oil reliance, oil production, oil regulations

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