President Donald Trump has granted a 60-day waiver to long-standing U.S. shipping laws in an effort to stabilize oil markets amid the Iran war, the White House confirmed to CNBC on Wednesday.
White House press secretary Caroline Leavitt said in a statement that the suspension of the Jones Act “will allow critical resources such as oil, natural gas, fertilizer and coal to flow freely into U.S. ports for 60 days.”
Levitt said the Trump administration “remains committed to continuing to strengthen critical supply chains.”
The Jones Act, signed by then-President Woodrow Wilson in 1920, mandated that transportation of goods between U.S. ports must be carried out by U.S. ships.
This law was aimed at growing the domestic shipping industry after World War I. The law has been criticized as a form of protectionism, with some economists recently arguing that it hinders domestic trade.
Trump’s two-month waiver was announced as oil prices resume rising after attacks on key energy infrastructure in the Iran war effectively shut down the Strait of Hormuz, the world’s key oil shipping route.
The international benchmark Brent price rose more than 6% on Wednesday morning, topping $109 a barrel. US crude oil prices are trading 2.95% higher at $99.05 per barrel.
Less than 100 vessels are compliant with the Jones Act, so exempting them from the law would allow more international tankers to transport fuel between U.S. ports.
However, the impact of suspending the law could still be limited, said Daleep Singh, chief global economist at asset management firm PGIM. That’s because of a “mismatch” in that the United States primarily produces light shale oil, while most of its refineries are built to process Middle Eastern crude oil.
“In layman’s terms, the U.S. can now move fuel more easily, but it has not been able to refine enough of what it produces to be self-sufficient,” Singh said in a client note Wednesday.
In recent days, President Trump has vented his frustration at U.S. allies’ reluctance to help secure the strait, which is effectively closed due to threats of Iranian attacks on ships. At the same time, the president asserted that the United States does not need any support for ongoing military operations.
—CNBC’s Spencer Kimball and Matt Peterson contributed to this report.
