Monday, September 25, 2023
Hawai'i Free Press

Current Articles | Archives

Thursday, July 25, 2013
CNBC: Slash Fuel Prices, Repeal Jones Act
By Selected News Articles @ 3:00 AM :: 4544 Views :: Jones Act

CNBC’s LaRocco talks Jones Act repeal

by Michael Hansen, Hawaii Shippers Council

Lori Ann LaRocco, Senior Talent Producer, CNBC, penned a wide ranging article on the Jones Act and its effects on the petroleum market in the United States.  CNBC published LaRocco’s article on Wednesday, July 24, 2013.

LaRocco interviewed approximately a dozen energy and shipping executives and experts who explained how the Jones Act increases the cost and causes supply bottlenecks in the supply of petroleum product prices especially in respect of motor gasoline and aviation jet fuel.

Gulf Oil CEO Joe Petrowski told LaRocco that the Jones Act adds 20 to 30 cents per gallon of motor gasoline.

Another expert LaRocco interviewed, John Heimlich, chief economist with Airlines for America, the U.S. airline industry trade association, said that the Jones Act increases jet fuel prices at Honolulu, Hawaii, Anchorage, Alaska, and San Juan, Puerto Rico, among other ports.

The Hawaii Shippers Council’s noncontiguous trades Jones Act reform proposal was mentioned by LaRocco, and she cited the undersigned.


The Hawaii Shippers Council (HSC) is a business league organization incorporated in 1997 to represent cargo interests – known as “shippers” – who tender goods for shipment with the ocean carriers operating the Hawaii trade.

Please contact the HSC at email if you wish to be placed on our email list.


CNBC: How can gas prices be slashed? Repeal this act

Published: Wednesday, 24 Jul 2013 | 6:00 AM ET

by Lori Ann LaRocco, CNBC Senior Talent Producer

Gasoline costs in the U.S. could fall as much as 30 cents a gallon if lawmakers would repeal a controversial shipping law, industry experts say.

The longstanding Jones Act—a section of The Merchant Marine Act of 1920—which requires any ship that carries goods or commodities in U.S. waters be American made, owned, operated and carry a U.S. flag, is being highlighted by one oil CEO as a reason behind the high price of gasoline in the U.S. and particularly in Florida.

"If foreign owned and flag ships were able to carry gasoline in US waters, the price of gasoline in the North East and in Florida could be 20 to 30 cents lower," Joe Petrowski, CEO of Gulf Oil, said.

Petrowski added it also makes environmental sense. "This goes beyond gasoline," he said. "Consumer products which are transported by trucks could also be shipped on U.S. waters, which would ease congestion on roads, reduce emissions and save money."

Vessels made in the United States are more than triple the price tag of their international competitors. A mid-sized product tanker called an MR Tanker costs $130 million in the United States versus $34 million in Korea, and a 4800 TEU (20-foot equivalent unit) container ship would have a price tag of $200 million in the U.S. vs. $46 million in South Korea, according to Marine Money International.  Shipping insiders say the "American Made" mandate has had a negative impact on the U.S. transportation system.

"The high cost of U.S. ship construction coupled to the Jones Act's absolute prohibition on the importation of foreign-built vessels has led to an inefficient major domestic transportation market sector saddled with an artificial shortage of ships, while the world is actually well supplied with modern and safe tonnage." said Michael Hansen, president of the Hawaii Shippers Council.

The council has its own reform proposal addressing the impact of the Jones Act on Alaska, Guam, Hawaii and Puerto Rico.

This is not the first time the price tag of the Jones Act has been talked about.

Ed Morse, chief commodity analyst at Citigroup, has said publicly the Jones Act adds between $6 and $8 a barrel to transport costs. Morse has said that based on his calculations, it's often cheaper for a Gulf Coast refiner to send gasoline to Brazil than to New York.

Per Heidenreich of private investment company Heidenreich Enterprise said that while he has no personal knowledge of how Petrowski came up with his calculations, he doesn't disagree and stressed the price of gasoline is also being jacked up in California.

"I will not doubt his calculations considering the domestic freight on tankers have increased on time charter basis to about $100,000 per day (compared to foreign-flag equivalent ships that earn about $12,000 per day)," Hedenreich said.

"There are also 17 or so Jones Act tankers that carry crude from Alaska to California that add to the cost of energy at the pump in California," he continued. "With Exxon's two new buildings under construction at Aker Philadelphia Shipyard at cost in excess of $200 million each, tankers that will replace old Jones Act tankers in the Alaskan/California trade this will sure increase the price at the pump in California."

The price of fuel expands beyond the pump.

The airline industry, whose largest expense is fuel, is also behind the structural change in the legislation that would allow foreign-made vessels to transport on U.S. waters.

"Marine transportation is the only mode of transportation that has a restriction on where the vehicle used to provide the transportation is built. And in this case it's the restricting the vessels used on U.S. waters to be built in the United States." said John Heimlich, chief economist for Airlines for America.

"We don't need to change the entire piece of legislation but we need legislation that can benefit and reflect today's economy. Any commodity that moves by vessel is effected here," he said.   Heimlich said that between the Boston, Miami Dade and Fort Lauderdale airports, the Jones Act premium on jet fuel combined annual of $80-100 million dollars.

"What this means for customers is either a downward pressure on the amount of service we can offer or an upward pressure on price," he said.

Airports that are reliant on the transport of jet fuel also include, Fort Lauderdale, San Juan, Alaska, San Francisco, Los Angeles and Honolulu.

"Bottom line we will pay several cents more a gallon to fuel up at Boston's Logan or Miami than at D.C., Atlanta or Chicago, in terms of transportation costs." Heimlich said.

With consumers feeling the crunch at the pump with the U.S. national average around $3.66 a gallon and other industries such as the airlines getting hit as well, the time could be now for Washington to revisit the Jones Act.

But energy analyst Kevin Book, managing director of research at Clearview Energy Partners, is not hopeful,

"The Jones Act has been around for 100 years and it hasn't been repealed yet," he said. "The argument that opening tanker markets to foreign flagged vessels would lower gasoline prices in the Northeast may be intellectually correct, but it also is politically tone deaf."

"Arguably, de-bottlenecking the mid-continent could make this argument stronger even with rails contributing to east coast supply," Book added. "As crude pools in the Gulf of Mexico, the price might make the trip by ship more accommodating."

Petrowski added that not only would repealing the law be more accommodating, but it would also incentivize refiners to invest capital in their refineries to increase capacity.

That would not only help drive down the price of gasoline—because there would be more supply—but it also would create jobs.

Repealing discussions are not new on Capitol Hill.

On June 25, 2010, Sen. John McCain introduced a bill called, "Open America's Water Act," which would fully repeal the Jones Act on anti-competitiveness grounds. But the move failed.

The GAO recently released a report on the impact the Jones Act has on the shipping market between the U.S. and Puerto Rico, and if modifying the Act would make sense. The results were inconclusive.

Shipping experts say they are frustrated with the lack of initiative from Congress to have a comprehensive plan on how to bring the law into the 21st century.

"We have gained no traction with this mission, which we call 'short sea shipping,' with any of our politicians." said Bob Curt retired vice president of ExxonMobil's worldwide Marine Transportation Division,

"No one seems to care about I-95 traffic, safety (the bus accidents), pollution and trucks tearing up our roads," he added. "Ships would not do this. Our mission is not to attack the Jones Act oil tanker business, but to get trucks with dry cargo and containers off the highways between Virginia and Boston and reduce transportation cost, improve road travel, reduce pollution, especially in the Northeast."

John Hill, marine consultant says the time is now for the Jones Act to be revised.  "In today's maritime world, the Jones Act has morphed from a strong positive to the biggest single reason for the demise of the US Merchant Marine," he said.

By CNBC's Lori Ann LaRocco. Follow her on Twitter @loriannlarocco


TEXT "follow HawaiiFreePress" to 40404

Register to Vote


808 Silent Majority

Aloha Pregnancy Care Center


Antonio Gramsci Reading List

A Place for Women in Waipio

Back da Blue Hawaii

Ballotpedia Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii


Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii ConCon Info

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together



Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Moms for Liberty

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

July 4 in Hawaii

Kakaako Cares

Keep Hawaii's Heroes

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

National Christian Foundation Hawaii

National Parents Org Hawaii

NFIB Hawaii News

No GMO Means No Aloha

Not Dead Yet, Hawaii

NRA-ILA Hawaii

Oahu Alternative Transport


OHA Lies

Opt Out Today

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Practical Policy Institute of Hawaii

Pritchett Cartoons

Pro-GMO Hawaii


Rental by Owner Awareness Assn

ReRoute the Rail

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

School Choice in Hawaii

Sink the Jones Act

Statehood for Guam

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii