US President Donald Trump has waived more than 100 years of shipping laws to curb soaring fuel costs as the US and Israel continue their war against Iran.
The White House on Wednesday activated a 60-day waiver to lift the Jones Act, which allows foreign-flagged ships to transport cargo to U.S. ports.
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Generally, under the Jones Act, goods transported between U.S. ports must be carried on U.S.-built, U.S.-flagged, and mostly U.S.-owned vessels. The requirement, which would severely limit the number of tankers available for domestic shipping, has the support of maritime industry unions.
Those industry groups had questioned whether Wednesday’s exemption would be effective in reducing fuel costs.
“Exempting the Jones Act will do nothing to lower gasoline prices; in fact, the primary driver of gasoline prices is the price of oil, not domestic transportation costs,” leaders of the American Maritime Officers, a maritime union, wrote in a letter to President Trump earlier this month.
“The Jones Act exemption would instead provide an opportunity for foreign shipping companies to avoid paying U.S. taxes, rely heavily on low-wage labor, and operate under regulatory regimes that circumvent international labor and ship safety standards.”
But the Trump administration defended the exemption as a temporary measure that could reduce shipping costs and speed up deliveries.
“This action will allow critical resources such as oil, natural gas, fertilizer, and coal to freely flow into U.S. ports for 60 days. The administration remains committed to continuing to strengthen critical supply chains,” White House press secretary Caroline Leavitt told Al Jazeera in a statement.
The move comes less than three weeks after the US-Israel-led war against Iran began.
As part of its counterattack, Iran has largely blocked shipping through the Strait of Hormuz, the narrow waterway that connects the Gulf and the Indian Ocean.
Roughly one-fifth of the world’s oil and liquefied natural gas supplies pass through this trade route.
However, since the war began on February 28, the number of tankers in the Strait has decreased. Only about 90 ships have passed through this route since the war began, and 20 ships have been attacked in this area.
More than 400 ships remain stranded near the route, according to Kpler, a global market intelligence platform. This blockage, in turn, caused fuel prices to soar around the world.
To lower domestic prices, President Trump has already announced his intention to release 172 million barrels of crude oil from the U.S. government’s Strategic Petroleum Reserve, which is held in case of emergencies.
Rachel Ziemba, a senior fellow at the Center for a New American Security think tank, said the Jones Act exemption is intended to support such efforts, but the impact on global price movements would be limited.
“The Jones Act waiver will help make releases of the Strategic Petroleum Reserve more effective and reduce the cost of transporting fuel from the Gulf Coast to other parts of the United States,” Ziemba said.
“But that in and of itself doesn’t add supplies. It just takes some of the friction off of getting supplies to the Northeast and to some extent the Pacific Coast and U.S. territories.”
costs go up
Since the war began, transportation costs have also increased. Marine insurance costs are rising across the board, in some cases by more than 1,000%, according to a Reuters analysis.
This is compounded by soaring fuel prices due to tight global oil supplies. The average price of a gallon of gasoline in the United States is $3.84, up from $2.92 ($0.77 to $1.01 per liter) last month, according to the American Automobile Association (AAA).
But experts say the Jones Act exemption will likely cause negligible changes at gas pumps.
“The exemption simplifies logistics and makes the flow of product, primarily from the Gulf Coast to the northeastern United States, a little cheaper and easier,” said Patrick de Haan, head of oil analysis at GasBuddy, an app that tracks fuel costs.
But De Haan cautioned not to expect prices to plummet from the exemption.
“Currently, lower pump prices have no ‘measurable’ impact; they only offset retail price increases. My guess is that they could offset a 3 to 10 cent per gallon ($0.007 to $0.02 per liter) price increase.”
This assessment was echoed in a 2022 analysis, which found that the Jones Act exemption would only save drivers on the U.S. East Coast about 10 cents per gallon.
Some believe that consumers will not be affected at all.
David St. Amand, president of maritime consulting firm Navigistics Consulting, provided a breakdown of the costs in a statement to Al Jazeera.
“The Jones Act exemption is unlikely to lower gas prices at the pump, and it is impossible to claim any benefit (e.g. $0.05) to U.S. consumers. Any benefit would almost certainly flow to new entrants to the market, such as commodity traders,” St. Amand said.
The US market is on a downward trend following the news of the Jones Act exemption. The Nasdaq and S&P 500 were both down 0.5%, and the Dow Jones Industrial Average was down 0.8% in midday trading.
Meanwhile, major shipping companies’ stock prices have soared in response to the news.
Shares in logistics company Maersk, which suspended shipping through the Strait of Hormuz in the wake of the strike, rose 2.5%. Container company Hapag-Lloyd, which also suspended shipments, rose 2.6%.
