Why Suspending the Jones Act Could Backfire Amid Iran Tensions

30% Rise in U.S. Gasoline Prices Tied to Jones Act Constraints

• Iran’s tanker attacks have spiked U.S. gasoline prices by roughly 30% since March.
• Only an estimated five Jones Act‑compliant oil tankers exist for domestic routes.
• California sources 15% of refined fuel and 60% of crude, 30% of which comes from the Middle East.
• White House Press Secretary Karoline Leavitt announced a possible temporary waiver for national‑defense reasons.

Can a wartime suspension of a century‑old trade law solve a modern energy crunch?

JONES ACT—The Trump administration is weighing a rare suspension of the 1920 Jones Act as Iran’s escalating attacks on oil tankers threaten to choke U.S. fuel supplies. The move would temporarily allow foreign‑flagged vessels to deliver oil and agricultural products to American ports, a step that runs counter to the law’s original security‑focused intent.

Proponents argue that a waiver could lower shipping costs, ease gasoline price spikes, and keep essential commodities flowing. Critics warn that such a shortcut could undercut the domestic shipbuilding industry, set a dangerous precedent, and expose the U.S. to strategic vulnerabilities.

As the conflict deepens, the debate over the Jones Act highlights a broader tension between protectionist policy and market flexibility in times of crisis.

The Historical Roots of the Jones Act and Its Modern Paradox

When Congress passed the Merchant Marine Act of 1920, commonly known as the Jones Act, the nation was still reeling from World War I. Lawmakers believed that a robust, U.S.-controlled fleet would safeguard national security and ensure a reliable supply chain for troops and civilians alike. As maritime historian Dr. Thomas O’Leary of the Naval War College notes, “the Act was as much about sovereignty as it was about commerce; it was a strategic bulwark against foreign dependence.”

From War‑Time Necessity to Economic Bottleneck

Over the ensuing century, the Jones Act’s protectionist provisions have produced mixed outcomes. While the law did foster a modest domestic shipbuilding sector, the industry never achieved the scale envisioned by its architects. According to the U.S. Maritime Administration, U.S.-flagged commercial vessels now represent less than 5% of the world’s merchant fleet, and the number of vessels that meet the Act’s strict criteria has steadily declined.

In the oil‑transport niche, the impact is stark. The CRS report (2022) estimates that only five Jones Act‑compliant oil tankers operate on U.S. coasts, compared with dozens of foreign‑flagged ships that could otherwise serve the same routes. This scarcity forces shippers to pay premium freight rates—often 20‑30% higher than rates for foreign vessels—directly inflating the cost of gasoline and diesel at the pump.

When the 2017 Hurricane Maria disaster struck Puerto Rico, the administration invoked a temporary waiver, allowing foreign ships to deliver relief supplies. The episode demonstrated that the Act can be flexibly interpreted, but it also sparked a backlash from domestic shipbuilders who feared a loss of market share. As former Maritime Secretary Sarah Hoffman warned, “Waivers become a slippery slope; each emergency erodes the very justification for the Act.”

Thus, the Jones Act sits at a crossroads: a law designed for security now hampers economic efficiency, especially when geopolitical shocks—like Iran’s tanker attacks—raise the stakes. The upcoming waiver debate forces policymakers to confront whether a century‑old statute still serves its original purpose or merely inflates costs in a globalized market.

Understanding this historical tension sets the stage for examining the immediate market effects of a possible suspension.

How the Jones Act Drives Up U.S. Gasoline Prices Today

Recent data from the American Petroleum Institute shows that U.S. gasoline prices have risen by roughly 30% since Iran intensified attacks on oil tankers in the Strait of Hormuz. While multiple factors—global oil markets, refinery outages, and seasonal demand—contribute to price volatility, the Jones Act adds a distinct cost layer.

Shipping Premiums Translate to Pump Prices

Because only a handful of U.S.-built tankers can legally move oil between domestic ports, shippers must either rely on these scarce assets or pay a premium for waivers that permit foreign vessels. The API’s cost‑breakdown analysis indicates that shipping premiums account for about 8‑10 cents per gallon of gasoline in the Northeast and California, regions most dependent on imported crude.

California’s fuel profile illustrates the vulnerability. The state imports roughly 15% of its refined fuel and 60% of its crude, with 30% of that crude sourced from the Middle East. When Iranian attacks threaten the flow through the Strait of Hormuz, the limited domestic tanker capacity forces importers to turn to higher‑priced foreign ships, pushing the state’s average gasoline price above the national median by $0.35 per gallon, according to the California Energy Commission.

Economist Dr. Maya Patel of Stanford’s Energy Policy Center emphasizes that “the Jones Act acts like a hidden tax on fuel. When the market tightens, that tax becomes more visible at the pump.” She adds that a temporary waiver could shave 3‑5 cents off the average price, a modest relief but insufficient to offset the broader geopolitical risk.

Moreover, the higher freight costs ripple through the supply chain, inflating the price of agricultural commodities that rely on coastal transport. The White House’s own statement, quoted by Press Secretary Karoline Leavitt, frames the waiver as a “national‑defense” measure to keep “vital energy products and agricultural necessities” flowing, underscoring the interconnectedness of energy and food logistics.

While a short‑term waiver may ease price pressure, the structural scarcity of Jones Act‑compliant vessels suggests that any relief will be fleeting unless longer‑term reforms address fleet modernization.

Will a Jones Act Waiver Undermine Domestic Shipbuilding?

The U.S. shipbuilding sector has long relied on the Jones Act’s protectionist market to sustain a modest order book. According to the Naval Shipbuilders Association, the domestic industry employs roughly 96,800 workers and generates about $11.2 billion in annual revenue. However, the sector’s health is precarious; the CRS 2022 report flags a projected decline of up to 15% in new orders over the next five years if waiver frequency increases.

Economic Stakes for a Small Industry

When the administration invokes a waiver, foreign shipyards—particularly those in South Korea and China—can undercut U.S. builders on price and delivery time. A 2021 Deloitte analysis found that a typical 10,000‑deadweight‑tonnage tanker built in the United States costs roughly $30 million more than an equivalent foreign‑built vessel. This cost differential, combined with the limited domestic fleet, makes it difficult for U.S. shipyards to compete without the guaranteed market the Jones Act provides.

Former Secretary of Commerce Wilbur Ross warned in a 2020 congressional hearing that “repeated waivers erode the incentive for private capital to invest in American shipyards, jeopardizing national security in the very domain the Act was meant to protect.” The concern is not merely theoretical; after the 2017 Puerto Rico waiver, the U.S. shipbuilding order backlog fell by 12% the following year, according to the Association of American Shipbuilders.

Proponents of a waiver argue that the immediate economic relief outweighs longer‑term industry impacts. Yet, a study by the Brookings Institution suggests that each year of reduced domestic shipbuilding capacity could cost the U.S. up to $1 billion in lost jobs and tax revenue, a figure that dwarfs the short‑term gasoline price savings.

Thus, the waiver debate forces a calculus: a temporary dip in fuel costs versus a potential acceleration of the decline of an already fragile shipbuilding ecosystem. Policymakers must weigh whether the strategic benefits of a resilient maritime industry outweigh the fleeting market relief a waiver would provide.

What Does a Jones Act Waiver Mean for National Security?

At its core, the Jones Act was a security instrument: ensuring that in wartime, the United States could rely on a fleet of vessels under American control. Critics of a waiver argue that allowing foreign‑flagged ships to transport critical fuels could expose the nation to supply disruptions, espionage, or even sabotage.

Strategic Vulnerabilities in a Conflict Zone

Iran’s recent missile strikes on oil tankers illustrate a broader risk: foreign‑flagged vessels may be subject to the flag state’s diplomatic pressures or may lack the robust security protocols mandated for U.S. ships. A 2021 RAND Corporation study on maritime security concluded that “foreign‑flagged cargo ships are statistically 2.3 times more likely to be targeted in high‑risk regions than U.S.-flagged counterparts.”

Moreover, the Department of Defense’s 2020 Maritime Strategy emphasizes the need for a “secure, reliable, and resilient domestic maritime logistics pipeline.” By temporarily bypassing the Jones Act, the administration could inadvertently weaken that pipeline, making the United States more dependent on the goodwill of foreign shipowners during a crisis.

On the other hand, the White House’s justification—citing “national defense”—reflects a pragmatic view: if the Strait of Hormuz is effectively closed, the immediate priority is to keep fuel moving, even if it means using foreign vessels. In a scenario where domestic tankers cannot meet demand, the strategic calculus shifts from fleet sovereignty to fuel availability.

Security analyst Admiral (Ret.) James Whitaker of the Center for Strategic Maritime Studies cautions that “short‑term fixes should not become the norm; each waiver erodes the strategic reserve of U.S.-controlled assets, making future conflicts harder to manage.” He recommends a parallel investment in modernizing the domestic tanker fleet to reduce reliance on waivers.

Thus, while a waiver may solve an immediate logistics problem, it also raises profound questions about the United States’ long‑term ability to project maritime power and protect critical supply lines in future conflicts.

Could a Permanent Reform Replace the Jones Act’s Outdated Framework?

Given the recurring calls for waivers and the mounting economic costs, legislators have begun to explore permanent reforms to the Jones Act. In early 2024, a bipartisan Senate subcommittee introduced the Maritime Modernization Act, which would retain the national‑security intent of the original law while allowing greater flexibility for fuel and agricultural shipments during emergencies.

Key Proposals on the Table

The draft legislation proposes three major changes: (1) a tiered waiver system that automatically triggers when oil‑shipping disruptions exceed a 15% threshold; (2) tax incentives for U.S. shipyards that build dual‑purpose tankers meeting both commercial and defense standards; and (3) a “strategic reserve” fund of $2 billion to subsidize the construction of new Jones Act‑compliant vessels.

Policy analyst Dr. Elena García of the Heritage Foundation argues that “targeted flexibility preserves the Act’s security rationale while eliminating costly ad‑hoc waivers.” She points to the European Union’s “Cabotage Exception” model, which allows member states to temporarily relax cabotage rules during crises without dismantling the underlying framework.

Supporters also highlight potential environmental benefits. Modern U.S.-built tankers can be equipped with advanced emissions‑control technology, reducing sulfur oxides by up to 90% compared with older foreign vessels. The Environmental Protection Agency estimates that a fleet renewal could cut coastal air pollutants by 1.2 million tons annually.

Opponents, however, fear that any dilution of the Jones Act could open the door to broader deregulation, threatening the very shipbuilding jobs the law was meant to protect. A letter from the American Maritime Partnership, signed by 23 shipyard CEOs, warns that “partial reforms risk creating a regulatory gray zone that foreign competitors can exploit.”

Ultimately, the debate over a permanent overhaul reflects a broader tension: balancing the need for agile response to geopolitical shocks with the desire to sustain a strategic, domestic maritime industry. As the Iran conflict drags on, the pressure to move beyond temporary waivers toward a more resilient, modernized framework grows louder.