The Iran war has caused “the largest supply disruption in the history of the global oil market,” according to the International Energy Agency.
As the Trump administration seeks to reduce oil prices, which have risen in the United States more than 40% since the start of Operation Epic Fury, it has rightfully waived an antiquated protectionist law. The Jones Act, which is part of the Merchant Marine Act of 1920, requires that ships transporting cargo from one U.S. port to another must be U.S.-built, at least 75% U.S.-owned, at least 75% crewed by U.S. citizens, and the ship must be registered (flagged) in the U.S. and therefore abide by other specific rules and regulations.
Meeting these arbitrary parameters drives up the cost of production and operations for commercial cargo vessels. The high regulatory burden imposed on U.S.-flagged ships, combined with the high cost of compliance, means that there are very few ships that even meet the requirements of the Jones Act.
TRUMP WAIVES JONES ACT IN BID TO STANCH RISE IN OIL PRICES
In 1950, the Jones Act fleet totaled 434 vessels. Today, it’s only 93. That remaining fleet is significantly older than the worldwide fleet, and with average costs exceeding $200 million, building new ships in the U.S. costs six to eight times as much as a similar ship built elsewhere.
By raising costs and severely limiting the supply of available ships for transportation between U.S. ports, the Jones Act drives up shipping costs. These costs, of course, are passed down to U.S. manufacturers that use the cargo as intermediate products and, ultimately, increase the cost of living for American families. Since crude oil, gasoline, and petroleum products are among the primary cargoes transported between U.S. ports, the Jones Act directly drives up energy prices.
A 2023 study by economists at the University of Chicago and Boston University estimated that “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 and 2019. On net, the study estimated that eliminating the Jones Act would increase U.S. consumers’ surplus by $769 million per year.
While not a cure, President Donald Trump’s decision to waive the Jones Act will help ease prices at the pump and remove a special interest regulation that helps a handful of businesses at the expense of tens of millions of households.
There’s also significant precedent, going as far back as 1942, to allow foreign ships to transport cargo. Some more recent waivers covering national security and natural and environmental disasters include: 1989 for the Exxon Valdez oil spill cleanup; 2005, 2012, 2017, and 2021 for hurricanes; 2011 for the Libya crisis and a remote fuel emergency in Alaska; and 2021 for the Colonial Pipeline cyberattack.
Beyond the immediate crisis, Congress should consider eliminating the Jones Act entirely. The law was passed under the notion that protecting U.S. shipbuilding would create a strong U.S. merchant fleet so that the country would not have to rely on foreign-made, foreign-owned, or foreign-crewed ships to transport military supplies and troops during war. Instead, it has produced the opposite — a U.S. merchant fleet so inadequate that the Jones Act is routinely waived during international conflict and natural disasters.
BY WAIVING THE JONES ACT, TRUMP ADMITS PROTECTIONISM HURTS AMERICANS
The Jones Act is exacerbating the impact of recent oil price spikes on people’s pocketbooks, and the Trump administration is right to issue a temporary waiver of the act during the Iran war.
The Jones Act is a relic that inflates energy prices and has crippled the U.S. shipping fleet. Eliminating it would reduce shipping and energy costs, modernize the U.S. shipbuilding industry, and finally align maritime policy with national security.
Richard Stern is the vice president of the Plymouth Institute for Free Enterprise at Advancing American Freedom. Rachel Greszler is a senior research fellow at the Plymouth Institute for Free Enterprise at Advancing American Freedom.
