Trump waives US shipping law for oil and gas in bid to lower prices

WASHINGTON – US President Donald Trump temporarily waived a century-old shipping mandate to lower the cost of transporting oil, gas and other commodities around the US, marking his latest bid to combat the rise in energy prices spurred by his war in Iran.

The president on March 18 authorised foreign-flagged vessels to transport a range of commodities between US ports for the next 60 days.

The short-term waiver of the Jones Act – a 1920 law designed to promote US shipbuilding – has been cast by the Trump administration as a way to ease the shipment of energy products vital to national security and prevent shortfalls that could disrupt military operations. 

“President Trump’s decision to issue a 60-day Jones Act waiver is just another step to mitigate the short-term disruptions to the oil market as the US military continues meeting the objectives of Operation Epic Fury,” White House Press Secretary Karoline Leavitt said in a statement. “The Administration remains committed to continuing to strengthen our critical supply chains.”

The Jones Act mandates that cargo carried between US ports must be transported on US-flagged, -built and -owned ships.

The waiver exempts those requirements for some cargoes, allowing foreign vessels to temporarily ship several products.

That includes coal, crude oil, refined petroleum products, natural gas, natural gas liquids, fertiliser, anything using refined petroleum products as a primary feedstock and other energy derivatives, according to White House officials who asked for anonymity because details of the authorisation were not yet public. 

Waiving Jones Act restrictions could reduce pressure on prices by allowing lower-cost foreign tankers to move around the country. The action is poised to cut the price of shipping crude from the Gulf to refiners on the US East Coast and gasoline and diesel products to populated markets in the US north-east. 

Waiving the Jones Act could save East Coast motorists roughly US$0.10 (S$0.13) for 4.54 litres, according to a 2022 JPMorgan Chase & Co estimate.

“The Jones Act prevents gasoline from being delivered by barge from the Houston Ship Channel to the Port of New York and other East Coast destinations because it makes shipping prohibitively expensive,” said Mr James Lucier, managing director at research group Capital Alpha Partners.

“Because of the Jones Act, cheap gasoline from American crude that might go from Houston to New York goes to Mexico instead.”

The action is one of a number of steps Mr Trump has taken or proposed in recent days as he seeks to counter the spike in crude and gasoline prices during the war. The conflict has led to the effective closure of the Strait of Hormuz, a critical waterway for energy supplies, which is blocking some 15 million barrels of oil and has sparked turmoil in financial markets. 

Still, the waiver is only expected to have limited effect given the sheer scale of the supply chain shock, according to some analysts. The war has spawned what the International Energy Agency termed “the largest supply disruption in the history of the global oil market”.

The waiver could also lower the cost of nitrogen fertiliser transported up the Mississippi River, though some analysts predict the waiver could come too late to meaningful lower costs for this spring’s prime planting window. 

Mr Trump is facing political pressures to address rising fuel prices, which play an outsize role in Americans’ attitudes on inflation and the state of the economy.

The oil spike poses a particular risk for Mr Trump and his Republican party ahead of November midterm elections set to determine control of Congress – and likely to hinge largely on the public’s views about the cost of living. 

The administration has already detailed plans to distribute 172 million barrels of crude from the US Strategic Petroleum Reserve – part of a 400 million barrel global release – and lifted some sanctions on the sales of Russian crude.

He has also vowed to dispatch the US Navy to escort tankers through Hormuz and promised a reinsurance programme to help reduce costs, though details of those proposals have been scant.

Oil and gas executives had recommended the Jones Act waiver as an additional lever that could help pare prices. US presidents have previously used the same authority to mitigate temporary supply disruptions.

For instance, former President Joe Biden last waived the Jones Act for a tanker heading to Puerto Rico with supplies after Hurricane Fiona in October 2022.

But the move can be controversial. The Jones Act is championed by some of the nation’s biggest shipbuilders as well as their allies in Congress – and they have previously battled even temporary waivers as undermining the law’s intent to support America’s maritime might. 

A White House official stressed that the waiver is temporary and that the administration can assure it will not impact American shipbuilding. 

The waiver is seen as ensuring there is efficient and cost-effective flow of energy supplies to US bases and military installations, which is key for national security and to sustain ongoing operations, a White House official said.

The waiver will ensure US airfields and military installations are properly supplied, avoiding any disruptive shortfalls, the official added. BLOOMBERG