Jones Act Has No Role in Fuel Prices

 

April 2013

 

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One of the American maritime industry’s most respected voices recently set the record straight on baseless accusations that the Jones Act somehow plays a role in bumping up the cost of gasoline in the U.S.

 

Retired U.S. Navy Vice Adm. Albert Herberger, who also served as U.S. maritime administrator and as the deputy commander of the U.S. Transportation Command, wrote an op-ed clearly explaining that the nation’s freight cabotage law doesn’t cause “pain at the pump.”

 

In part, Herberger, who remains an industry spokesman, wrote, “The Jones Act is a long-standing U.S. maritime law that mandates the use of vessels that are American-crewed, -built and -owned to move cargo between two U.S. ports. The law is critical for American economic, national and homeland security, which is why it has enjoyed the support of the U.S. Navy, many members of Congress of both parties, and every president in modern history. It doesn’t make sense to blame the American shipping industry in general, and the Jones Act in particular, for the spike in gasoline prices. The cost of shipping does not affect the price at the pump — the global market does.

 

“The overwhelming factor in the price of gasoline at the pump is the price of its main raw material — crude oil, the price of which is set in the global marketplace,” he continued. “The cost of crude accounts for about two-thirds of the price of gasoline. Data from the American Petroleum Institute show the price of crude oil has spiked over the past several months, which has led to the spike in gasoline prices.”

 

The admiral added that basic supply and demand also affects the price at the pump, and while the reason for the spike in crude oil prices is complicated, “most experts believe an improving economy and demand in China has also driven the crude spike. According to the Energy Information Administration, other factors also affect the price at the pump, including the value of the dollar, state and local taxes, geopolitical issues, decisions by OPEC, inflation and weather. The cost of transportation within the United States, however, is so insignificant as to have no effect on the price to consumers at the pump.”

 

Also worth noting, Herberger wrote, is that the Jones Act “has proved efficient and has made significant contributions to the U.S. economy. Today, the maritime industry is the most economical and environmentally friendly form of domestic transportation, moving more than 1 billion tons of cargo annually at a fraction of the cost of other modes. It is no wonder that the domestic fleet governed by the Jones Act moves a quarter of the nation’s freight for just 2 percent of the national freight bill. And despite false claims by critics, there is ample capacity in the U.S.-flag fleet to address changes in petroleum product markets as a result of Northeast refinery closures. A large American tank vessel fleet of modern and highly sophisticated vessels exists in this country to move petroleum products from the Gulf of Mexico to the Northeast.

 

“It is our hope that the gasoline prices come down as soon as possible. The U.S.-flag fleet stands ready to continue transporting fuel efficiently and effectively to meet America’s energy needs.”

 

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