To address the surge in gasoline prices due to the ongoing conflict in Iran, President Trump announced a 60-day waiver of the Jones Act on Wednesday. This act is a century-old U.S. shipping regulation that has faced criticism for elevating energy costs.
White House press secretary Caroline Levitt mentioned that this waiver aims to “mitigate short-term disruptions to oil markets” during the Iran conflict and to facilitate the uninterrupted flow of essential resources like oil, natural gas, fertilizer, and coal to U.S. ports.
The administration hinted just last week about the possibility of suspending the law. Trump described the Jones Act as “restrictive,” but many might wonder—what is this act really, and how does it impact gas prices at the pump?
Understanding the Jones Act
The Jones Act was enacted in 1920 under then-President Woodrow Wilson as part of the Merchant Marine Act, aimed at bolstering the American shipping industry following World War I.
It essentially bars foreign-flagged ships from transporting cargo between U.S. ports. Instead, only U.S.-built, U.S.-owned, and U.S.-registered vessels crewed by U.S. personnel can operate such transport. This law was designed to ensure that the U.S. maintained a robust maritime fleet in times of conflict, especially after Germany devastated the American merchant fleet during the war.
Current Significance of the Jones Act
The Jones Act now restricts foreign vessels from carrying a wide range of goods—including energy resources and petroleum products—between U.S. ports. This restriction is particularly pertinent as hostilities escalate between the U.S. and Iran.
After a joint airstrike by U.S. and Israel on Iran on February 28, Tehran responded by closing access to the Strait of Hormuz, an essential maritime route that accounts for 20% of global oil transportation. They have taken aggressive action against several oil tankers and issued threats against ships navigating the strait.
As a result, energy prices have surged, with Brent crude reaching $108 a barrel and West Texas Intermediate at $98. The national average price for gasoline has reportedly climbed to $3.84 a gallon, according to AAA, and experts warn of even higher prices if the conflict escalates.
Diesel prices have also soared beyond $5 a gallon, negatively impacting the U.S. transportation sector and potentially increasing costs for everyday products such as food and clothing, as noted by energy specialists.
Trump’s Rationale Behind the Jones Act Waiver
This exemption from the Jones Act is yet another effort by Trump to relieve strain on the energy sector as alternatives are sought for shipping routes while Iran maintains a chokehold in the Persian Gulf.
The U.S. Department of Transportation allows for exemptions from the Jones Act, albeit they are rare and must be approved by the Secretary of Defense for national security reasons. Past instances of short-term waivers were granted following natural disasters, like Hurricane Katrina in 2005, Hurricane Maria in 2017, and a cyberattack that halted a key pipeline in 2021.
Some critics are calling for a full repeal of the Jones Act, arguing it is excessively protectionist and hampers domestic trade.
There are concerns that operating U.S. ships comes with higher costs compared to their foreign counterparts—leading to elevated prices for consumers, particularly in states reliant on waterborne supplies, such as Hawaii, Puerto Rico, and Alaska.
Furthermore, critics argue that the Jones Act complicates and delays deliveries of emergency supplies.
Public Reaction to Trump’s Waiver
This week, some users on social media expressed confusion over why the Jones Act wasn’t permanently repealed amidst discussions of a waiver.
Joe Jorgensen, the liberal presidential candidate from 2020, urged the Trump administration to eliminate shipping regulations entirely, commenting that if suspending the act lowers oil prices, it reveals the extent of damage it inflicts when enforced.
Peter Schiff, a chief global strategist at Euro Pacific Capital, echoed similar sentiments, calling for total repeal, noting that allowing foreign tankers to supply East Coast refiners from other U.S. locations highlights the law’s role in escalating gas prices.
Potential Impact on Gas Prices
Trump’s recent action to permit foreign-flagged ships could alleviate some pressure on gas prices, but experts caution that any relief may be minimal.
According to the Center for American Progress, the waiver might lower east coast gas prices by up to 3 cents per gallon. However, changes in energy prices often take time to trickle down to consumers due to stockpiling practices at refineries.
Moreover, there are concerns that sidelining U.S. shippers could lead to significant profits for the oil industry during this time.
As the situation in Iran continues to unfold, both oil and gasoline prices are likely to stay elevated. Despite the U.S. being a major oil exporter, its reliance on global supply chains leaves it susceptible to various disruptions.
While the country mainly produces light, sweet crude oil, its refineries, particularly on the east and west coasts, are equipped to handle heavier crude grades, driving the need for imports.
What’s Next?
It’s uncertain how swiftly the Jones Act waiver will impact fuel prices or how substantial the difference might be.
Despite other measures from the Trump administration, such as lifting sanctions on Russian energy temporarily, indicators related to oil and gas pricing still reflect an upward trend.
This past week, the International Energy Agency agreed to release a record 400 million barrels of crude oil to help stabilize prices amid supply issues.
President Trump has pledged to release 172 million barrels from the U.S. Strategic Petroleum Reserve.
