Impacts of the Jones Act on U.S. Petroleum Markets

There’s been a lot of JA theads on here, I thought this one interesting because it gives actual costs.

Eliminating the Jones Act would have reduced average East Coast gasoline, jet fuel, and diesel prices by $0.63, $0.80, and $0.82 per barrel, respectively, during 2018–2019,

From Marginal Revolution.


Thanks for the reminder on this. I want to download the paper and see if/how they distribute the cost changes to different elements of the Act.

So, 2 cents or less per gallon. Annual savings might be enough to spurge on a McD happy meal.

1 Like

Also worth highlighting:

The Gulf Coast gasoline price would increase by $0.30 per barrel.

The last two paragraphs of the papers Conclusion provide a really succinct explanation of the political reasons that historically result in maintaining the status quo:

We therefore conclude that the primary beneficiaries of repealing the Jones Act for coast- wise trade in oil and petroleum products would be East Coast, and especially Southeast, consumers. Existing suppliers of oil and refined products to the East Coast would be harmed, though their losses would be smaller than East Coast consumers’ gains, reflecting the cost efficiencies that would be realized from a Jones Act repeal. Gulf Coast producers would benefit, though their gains would be limited because for most products and months, foreign exports would remain on the margin, leaving Gulf Coast prices unchanged. Moreover, some Gulf Coast producers are also suppliers to the East Coast, so that their overall economic surplus might be diminished as a consequence of a Jones Act repeal.

These distributional impacts potentially speak to the politics around the Jones Act. The overall reduction in oil and refined product suppliers’ profits that we find would follow from eliminating the Jones Act suggests that industry participants have limited incentives to advocate for a repeal. Thus, our results may explain why, for example, both of Louisiana’s senators have opposed repealing the Jones Act despite the state’s prominence in oil production and refining (Seafarers Interantional Union, 2020). In contrast, the primary beneficiaries from repeal are East Coast refined product consumers, who would benefit in aggregate by $802 million annually. This sum, however, amounts to only a few dollars per year per person. The beneficiaries of a Jones Act repeal can therefore be characterized as an instance of a diffuse interest, in the spirit of Olson (1965), that is likely difficult to mobilize for policy change.

On the crude side, WTI coming out of the USG would fit the slate for many USAC refineries built to run on WAF and NSea crude. Today, those refineries import, while we export WTI. Ex the JA those US barrels would go to US refiners.

For those who wish to reduce crude imports and also want US crude to stay in the US this would be a step change in that direction.

In other words, the Jones Act costs US gasoline , diesel, and heating oil consumers a little over $0.01, that’s ONE CENT, per gallon.

We all know how much we could buy with an extra penny.

Road tax on gasoline and diesel, depending upon the state is around $0.50, that’s 50 cents a gallon.

Clearly, the Jones Act is not a significant consumer cost.


WTI is more expensive than the crude we import so the biggest reason we export domestic and import foreign is because it’s more profitable. The Jones Act isn’t a factor in that.

As of Friday- girrasol and Bonny light were abt $78/bbl, Brent abt $77, WTI was abt $72

Part of the reason US crude and products are exported, and foreign crude is imported, and certainly products are imported, is because that can be done on lower cost, and more ready available foreign flag ships which exploit very cheap Third World labor, and flag states with no enforcement of regulations.

There should by a 10% export tax and a 10% import tax on non-North American oil to stabilize and secure North American domestic supplies at reasonable cost. Over the long run, this would result in more stable supply and prices at very little extra cost.

I say North American instead of US because the US, Canada and Mexico economies and manufacturing integrated duty free under NAFTA (or whatever they call it now). Canada is our largest foreign oil supplier. The Canadian tar sands are the largest proven oil reserves in the World. Canada has excess refining capacity.

That would also stop the game of shipping US oil from the Gulf of Mexico to Europe, and the importing European oil back to the East Coast to avoid using US flag tankers and ATBs. This would significantly help the Jones Act tanker and ATB trades.

If the difference is so small why do the distributors on the USEC buy refined products from Canada, Europe etc.?


Now we export clean products- mostly to Mexico, and import clean into the USAC - mostly due to lack of or cost of JA tonnage. Between this and the crude, there are job for US sailors here if companies could buy tonnage on the international market.

1 Like

lets fix a non-market system, that does not work, by adding more non-market to it.

This just penalizes US Refiners and producers, and in the end - US consumers.

The JA answer is simple in therory - imposible maybe in practice. If a US Merchant Marine, and US Shipbuilding are a strategic military need, then make that case in Congress, and fund it through the DOD. Not via indirect market manipulation that spreads the cost unevenly, maybe unfairly.

The last thing we need are more inept government bureaucrats managing more high cost taxpayer funded government programs.

Taxes are necessary to fund the government. Taxes have to come from somewhere. Import and export taxes on oil are as good a place as any to generate tax revenues. Plus, it’s “green” to tax fossil fuels and encourage a shift to alternative energy.

I’d rather know that we have stable and secure oil supplies at a price that is less prone to big price fluctuations than have the lowest price.

1 Like

too late - that is what we already have.

A bit esoteric - but, in a fiat economy like the US which has monopoly control of its currency this is not true. The goverment spends money into existance, and taxes it out. The goverment can buy anything it wants denominated in $ into perpetuity. The question is never can we afford something - it is should we buy it. The real constraints are real resources ( factors of production, labor )

No matter how we may like to think we can, oil is a very fungable commodity whose price is set internationally - we have a very very very limited ability to effect prices for any length of time with goverment policy.

But if you want to keep US Crude oil - going to US refineries than allowing WTI to flow to the USAC and to a lesser degree to the USWC is the low hanging fruit.

We can only print money and overspend for just so long until the US needs high Northern European tax rates on its way to default.

If the US holds its present course, printing money and deficit spending, while allowing unlimited
It’s immigration, supporting people who refuse to be productive, and providing a free defense for three quarters of the World, it’s just a question of time until we become Greece or Argentina, on our way to eventually becoming the failed Roman Empire.

When the US economy catches a cold, the rest of the World gets pneumonia. The economic tide in the US lifts all boats, or leaves them high and dry.

1 Like

I know all that is conventional wisdom - spend about 20 minutes listening to Dr. Kelton with an open mind for a new perspective

the only way the US goverment can default is if it makes a political decision to default.

The US has been deficit spending its entire existance, except for a handfull of years, and each time the goverment went into surplus, the economy went into recession.

Every $ of the deficit, every single $ is a dollar put into the private sector.

There are real contraints on deficit spending. If the goverment spending is in competition with private spending for some real good, service, labor, or factor of production - that is inflationary and the Goverment should not compete with the private sector for those real reasources.

So back to the discussion, if the Goverment, and by that I mean the populace as represented by the Goverment believe there is a real need for a US Merchant Marine or US Shipbuilding it can absolutly “afford” to directly fund that need. The question is not can we afford it, the question is should be buy it.

Most of our imports come from Canada and Canadian crude is roughly $20 cheaper per barrel than WTI.