Trump Pauses Jones-Act Shipping Mandate, Opening U.S. Oil Routes to Foreign Tankers
- The White House issued an open-ended waiver letting non-U.S. hulls haul crude and fuels between American ports.
- Coastwise freight rates on U.S.-flag tankers average $64 000/day versus $22 000/day for comparable foreign ships.
- Refiners along the Atlantic and Pacific coasts say the move could cut crude-delivery costs by up to $4/bbl within 30 days.
- Shipbuilders’ and maritime-unions’ groups warn the waiver threatens 650 000 Jones-Act-dependent jobs.
Historic waiver tests a century-old law designed to protect U.S. shipyards and merchant sailors.
JONES ACT—WASHINGTON — President Donald Trump on Tuesday signed an emergency directive suspending the Jones-Act requirement that only U.S.-built, U.S.-flagged and U.S.-crewed vessels move petroleum between domestic ports, aiming to ease record-high gasoline prices that hit a national average $3.87 per gallon last week.
The order, effective immediately, allows foreign-flag tankers to carry crude from Gulf-coast export terminals to refineries in California, the Pacific Northwest and the Northeast for the first time since the law’s enactment in 1920.
Administration officials told reporters the waiver will remain in place “as long as market conditions warrant,” but provided no sunset clause, marking the broadest exemption since Hurricane Katrina in 2005.
Why the Jones Act Keeps U.S. Oil Freight Costs Triple Global Levels
The Jones Act, Section 27 of the Merchant Marine Act of 1920, bars any vessel that is not U.S.-built, U.S.-owned, U.S.-flagged and at least 75 percent U.S.-crewed from moving merchandise—including crude oil, gasoline or jet fuel—between two American ports. The statute’s original goal was to maintain a domestic fleet capable of national defense, but today only 93 Jones-Act-qualified tankers and articulated tug-barges remain in service, according to the U.S. Maritime Administration.
That shallow pool keeps day-rates elevated. Poten & Partners pegged the average 2025 rate for a 300 000-barrel Jones-Act tanker at $64 000, versus $22 000 for a similarly sized foreign-flag MR tanker in international trades. The differential translates into roughly $1.40 per barrel on a Gulf-to-New York voyage, or about 10 ¢ per gallon of gasoline once refining margins and taxes are layered in.
Shipyard economics drive the premium
“A U.S. commercial shipyard now delivers a product-tanker at roughly $130 million, while a Korean yard quotes $55 million for a comparable specification,” said Omar Nokta, shipping analyst at Jefferies. Labor, environmental compliance and steel costs explain much of the gap, and because Jones-Act hulls cannot be replaced by cheaper foreign alternatives, operators pass the capital cost onto charterers.
The result is a closed market. Gulf-coast refiners produce 5.6 million barrels per day of products, yet pipeline capacity to the East coast is limited to 1.4 million b/d. The remainder must move by sea, giving Jones-Act carriers pricing power that refiners call a “shipping tax” baked into every gallon.
Trump’s waiver does not abolish the law; it simply suspends the U.S.-build and U.S.-flag requirement for petroleum cargoes. Foreign ships must still comply with U.S. safety and environmental rules, and crews will be vetted by Customs and Border Protection. Still, industry executives expect spot Gulf-to-New York freight to drop toward the international MR benchmark once enough foreign tonnage repositions.
The administration’s bet is that cheaper domestic freight will encourage Gulf producers to send more barrels to coastal refineries instead of exporting them, nudging gasoline inventories higher and prices lower ahead of the summer driving season.
Presidents Have Waived the Jones Act Only Seven Times—Always After Natural Disasters
Before Tuesday, every Jones-Act suspension since 2000 followed a hurricane or cyber-attack. Homeland Security secretaries issued waivers for Katrina (2005), Sandy (2012), Harvey, Irma and Maria (2017), the Colonial Pipeline shutdown (2021) and Ian (2022). Each lasted 7–14 days and targeted specific fuel shortages.
Trump’s new waiver is the first justified on macro-economic grounds—soaring gasoline prices—not physical supply disruption. The statute allows suspension when “in the interest of national defense,” a phrase previous administrations interpreted narrowly. By contrast, the White House counsel’s office argues that inflationary pressure on household budgets constitutes an economic-security threat, broadening the precedent.
Congressional reaction splits on party lines
Senate Commerce Chair Maria Cantwell (D-WA) called the move “a stealth repeal that undermines U.S. maritime capacity,” while Representative Troy Nehls (R-TX) said it “unshackles Texas energy and delivers relief at the pump.” Legal scholars note that because the waiver is executive, a future president could rescind it overnight, creating uncertainty for refiners weighing term-charter decisions.
The administration has not disclosed internal estimates of how many foreign tankers might enter the trade. Analysts at Maritime Strategies International expect 30–35 MR-sized vessels—each carrying 300 000–330 000 barrels—to reposition from the Mediterranean and Caribbean within 30 days, adding roughly 10 million barrels of monthly capacity between Texas and New York.
That volume could offset the 700 000 b/d of East-coast refinery demand currently served by Jones-Act barges, pushing coastal freight benchmarks toward parity with international levels and eroding the profit cushion of U.S.-flag owners who have invested more than $4 billion in new tankers since 2010.
Which Refiners Gain—and Which Shipowners Lose—from Cheaper Coastal Freight?
PBF Energy, Phillips 66 and Citgo stand to gain the most. PBF’s 190 000 b/d Delaware City refinery sources roughly 110 000 b/d of crude by water from the Gulf or Canada; cutting freight by $3–4 per barrel adds an estimated $120 million to annual EBITDA at current crack spreads, according to Tudor Pickering Holt.
Phillips 66’s 340 000 b/d Linden (New Jersey) plant and the 238 000 b/d Monroe Energy Trainer site face similar logistics. Together, East-coast facilities import 550 000 b/d of crude and feedstock; cheaper domestic barrels could displace 200 000 b/d of Nigerian or Bakken-by-rail supply, trimming delivered cost by $2–3 per barrel.
U.S.-flag owners brace for rate collapse
Conversely, companies like Overseas Shipholding Group, Crowley Maritime and Kirby Corp. face a potential 30–40 percent drop in spot rates. OSG’s fleet of 21 Jones-Act tankers and ATBs generated $485 million in revenue last year; every $10 000 decline in day-rates erodes roughly $75 million in annual revenue, Morgan Stanley calculates.
Shipbuilders are also at risk. Philly Shipyard, the last major U.S. commercial yard, has five product-tankers on order for American owners. If the waiver persists, customers could cancel or renegotiate newbuild contracts, jeopardizing 2 500 union jobs. The yard’s CEO warned that “a prolonged waiver could finish what globalization started—ending large-scale U.S. commercial shipbuilding.”
Refiners counter that the policy merely removes a legislated cost premium. “We’re not anti-maritime; we’re pro-consumer,” said Tom Nimbley, PBF CEO. “If a Korean-built, Bahamian-flagged ship can deliver Bakken crude to Delaware City safely, why should families in Wilmington pay an extra 10 ¢ per gallon?”
Could a Permanent Repeal Follow the Waiver?
Maritime attorneys note that once foreign hulls enter the coastwise trade, recapturing that market for U.S. yards becomes politically harder. A short-term waiver creates factual evidence—lower freight rates, stable supply—that repeal advocates can cite in Congress.
Senator Mike Lee (R-UT) has already re-introduced the Open America’s Waters Act, which would exempt all commodities from Jones-Act requirements. While the bill stalled in committee last session, a sustained price dip at the pump could sway swing-state lawmakers. House Shipping Subcommittee Chair Salud Carbajal (D-CA) opposes repeal, but concedes “temporary waivers can become permanent if consumers see a benefit.”
Defense hawks warn of strategic risk
The Navy’s 2025 Force Structure Assessment relies on the commercial Jones-Act fleet as a sealift reserve. Military Sealift Command estimates that 190 U.S.-flag commercial hulls, including 40 product-tankers, could be mobilized in wartime. If U.S. yards lose orders, the industrial base to build replacement hulls atrophies. A 2024 Congressional Research Service report found that eliminating Jones-Act cargo preference could cut Navy-ready hulls by 30 percent within a decade.
Environmental groups are split. The Sierra Club argues cheaper domestic crude could displace heavier Venezuelan or Saudi grades, lowering carbon intensity, whereas the Offshore Marine Service Association contends foreign-flag ships have weaker labor and safety standards.
The administration has given no end-date, saying only that the waiver will be reviewed “monthly.” History suggests politics will decide: if retail gasoline falls below $3.50 per gallon and stays there, consumer gratitude may outweigh maritime-industry pressure, turning an emergency waiver into the first chip away at a century-old protectionist pillar.
What Does Cheaper Domestic Freight Mean for Global Oil Flows?
Lower intra-U.S. freight could paradoxically reduce Gulf-coast crude exports. Today roughly 4.2 million b/b of U.S. crude leaves Corpus Christi, Houston and Nederland for foreign refineries because it is cheaper to export than to ship Jones-Act to Philadelphia. A waiver equalizes delivered costs, encouraging barrels to stay home.
That shift would tighten medium-sour grades in the Atlantic basin, supporting Brent timespreads and narrowing the WTI discount. Analysts at Energy Aspects see potential for a $1.50–2.00 per barrel compression in the Brent-WTI spread if 500 000 b/d of Gulf exports pivot toward domestic coastal refineries.
OPEC+ may need to recalibrate
At the same time, higher U.S. product output could pressure Atlantic-basin gasoline cracks, eroding margins for European and Nigerian refiners. The International Energy Agency’s March oil-market report already projects a 600 000 b/d global product surplus in Q3; additional U.S. runs would amplify that glut.
For American drivers, the bottom line is measurable. A 5 ¢ per gallon decline in retail gasoline saves households roughly $6.5 billion annually, according to the American Automobile Association. Whether the savings last depends on how long the president keeps the waiver alive—and whether Congress ultimately chooses to rewrite the rulebook that has shaped U.S. shipping since the aftermath of World War I.
Frequently Asked Questions
Q: What is the Jones Act and why does it raise oil prices?
The 1920 law requires cargo moved between U.S. ports to sail on American-built, -crewed and -flagged vessels. Because these ships cost up to three times more than foreign hulls, freight rates inside the U.S. stay artificially high and feed into pump prices.
Q: Can a president suspend the Jones Act without Congress?
Yes. The Merchant Marine Act grants the Department of Homeland Security authority to waive Jones-Act rules when national-security or economic emergencies require it; past waivers followed hurricanes Katrina, Sandy and Harvey.
Q: How much could a waiver trim gasoline prices?
Analysts at Poten & Partners estimate coastal Jones-Act tanker rates add 10–15 ¢/gal to East and West-coast gasoline; a temporary waiver could shave 3–7 ¢ within two weeks if foreign tonnage fills the gap.
Q: Which U.S. refiners benefit most from cheaper domestic crude freight?
East-coast plants like PBF’s 190 000 b/d Delaware City and Phillips 66’s 340 000 b/d Linden welcome cheaper Bakken or Gulf-coast barrels they cannot pipeline, while Gulf refiners gain wider outlets for record U.S. output topping 13.4 M b/d.
