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East Coast Gas Would Only Drop a Dime If Jones Act Lifted, Says JPMorgan

·2 min read

(Bloomberg) -- Waiving a century-old shipping law to let foreign-flagged vessels transport fuel between US ports -- a favorite talking point of a US refinery sector trying to get the White House off its back -- would only save East Coast drivers about 10 cents a gallon at the pump, JPMorgan said.

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A potential waiver of the Jones Act is one of several tools the Biden Administration is weighing to reduce the effects of record energy costs for Americans. However, like most moves being considered by lawmakers, it’s unlikely to bring sustained relief.

A 10 cent per gallon cut would be about 2% of the current average New York state pump price, according to auto-club AAA. Pump prices in the US mounted a record rally since the beginning of the month until they dipped slightly this week. At $5 a gallon, the national average is still more than 60% higher than a year ago.

Read more: What the Jones Act has to do with US gas prices

“Unfortunately for US drivers looking forward to hitting the road this summer after two years of lockdowns, the tools at the Administration’s disposal which might help lower fuel prices are likely limited in both number and potential impact,” JPMorgan Chase & Co. analysts including Natasha Kaneva said in a note.

It currently costs around $4.66 per barrel to move fuel from the US Gulf Coast to New York Harbor on a Jones Act-compliant vessel, according to data from price reporting agency Argus Media. A non-Jones Act ship for a similar route is nearly $1 per barrel cheaper as of earlier this week, according to Argus.

Waiving the Jones Act -- as suggested by Exxon Mobil Corp. as a means to lower pump prices -- will make regions like New York Harbor more competitive against overseas buyers in Latin America, who are currently sucking up a massive amount of US fuel to the detriment of suppliers trying to bulk up inventories on the East Coast.

But a blanket Jones Act waiver could alienate some of the biggest shipbuilders, vessel owners and organized labor in the country. Waivers for routes where Jones Act vessels currently dominate -- such as from the US Gulf Coast to Florida -- would be “toxic,” Andy Lipow, president of Lipow Oil Associates, said in a phone interview with Bloomberg.

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