Sunday, October 1, 2023
Hawai'i Free Press

Current Articles | Archives

Monday, May 19, 2014
Congressional Report: Jones Act Boosts Oil Prices
By News Release @ 8:34 PM :: 5603 Views :: Jones Act

U.S. Rail Transportation of Crude Oil: Background and Issues for Congress

The Jones Act

From Congressional Research Service May 5, 2014 (Excerpt -- pages 9 & 10)

...The Jones Act may have a profound impact on where crude oil is sourced and how it is transported. The Jones Act requires that vessels transporting cargo between two U.S. points be built in the United States, as well as crewed and at least 75% owned by U.S. citizens.27

The domestic build requirement for tanker ships, in particular, has been identified as contributing to higher costs in moving domestic crude oil along the coasts.28 Domestically built tankers are about four times the price of foreign-built tankers,29 and there is limited capacity in U.S. shipyards to build them. Much of the existing crude oil tanker fleet was built since 2000 to meet Oil Pollution Act of 1990 (P.L. 101-380) requirements that tankers calling at U.S. ports have double hulls. Two crude carriers are expected to be delivered in 2014 to replace two vessels in Alaska trade.

As of June 2013, the Jones Act-eligible fleet of crude oil tankers consisted of 10 ships, all employed in moving Alaska crude oil to the U.S. West Coast or to a refinery in Alaska.30 Since annual Alaska oil production has fallen by about 46% over the last decade, the Jones Act crude oil fleet has been in decline. About 30 Jones Act-eligible tankers carry chemicals or refined petroleum products, such as gasoline or jet fuel, but these ships do not readily alternate between carrying dirty oil (crude oil, residual fuel oil, asphalt) and refined (clean) petroleum products because the tanks would have to be extensively washed after carrying dirty product, a time consuming and costly process. Some product vessels have fundamentally different designs from crude carriers and would require a layup in a shipyard to be converted to move crude oil.

Phillips 66 has chartered two Jones Act tankers to move crude oil from Eagle Ford, TX, to a refinery in Linden, NJ (in proximity to New York Harbor).31 Phillips 66 has stated that if more Jones Act-eligible tankers were available, it would like to receive 100,000 barrels a day of Eagle Ford oil at this refinery (it would need several tankers to accomplish this, the exact number depending on the size of the tankers).32 EIA data (which specify oil movement only between regions, not to individual refineries) indicate that over 13 months from January 2013 to the end of January 2014, an average of 22,000 barrels a day of Texas oil (8.5 million barrels total) were shipped by vessel to all U.S. Northeast refineries.33

Meanwhile, over the same 13 months, twice as much Texas oil (17.1 million barrels) was shipped to refineries in eastern Canada, in foreign flag tankers. The oil shipments from Texas to Canada cost approximately $2 per barrel, compared with $5 to $6 per barrel for shipments from Texas to U.S. Northeast refineries in Jones Act qualified tankers. The cost difference for a 300,000-barrel tanker amounts to around $1 million, meaning that a Texas oil producer receives $1 million less for its oil when shipping to U.S. Northeast refineries than when shipping to Canadian refineries.34

The Bayway refinery also receives 50,000 barrels of Bakken oil per day by rail, and is finishing construction of a rail unloading terminal with capacity of 75,000 barrels per day. The refinery has a capacity of 238,000 barrels per day. Its remaining sources of oil may be offshore oil from eastern Canada (with shipping rates fluctuating around $1.20 per barrel) and Nigeria (with shipping rates around $1.60 per barrel), as EIA data indicate these were the top two sources of foreign oil for Northeast refineries in 2013.35

read ... U.S. Rail Transportation of Crude Oil: Background and Issues for Congress


27 The law is codified at chapters 81, 121, and 551 of Title 46, United States Code.

28 See for instance, “Oil and the Ghost of 1920,” Wall Street Journal, September 13, 2012; Senate Committee on Energy and Natural Resources, Testimony of Faisel Khan, Managing Director, Integrated Oil and Gas Research, Citigroup. Hearing to Explore the Effects of Ongoing Changes in Domestic Oil Production, Refining and Distribution on U.S. Gasoline and Fuel Prices, July 16, 2013.

29 U.S. Maritime Administration, Title XI Ship Financing Guarantees, Pending and Approved Loan Applications; American Petroleum Tankers S-1 SEC Filing; RS Platou Economic Research, annual and monthly reports; press releases from Teekay Tankers, Scorpio Tankers, and Euronav.

30 U.S. Maritime Administration, U.S. Flag Privately Owned Merchant Fleet, Oceangoing Self-propelled Vessels.

31 “Phillips 66 Charters Tankers To Bring Shale Oil To Bayway,” Argus Media, December 13, 2012.

32 Phillips 66 presentation at Bank of America Merrill Lynch Refining Conference, March 6, 2014.

33 U.S. Northeast refineries are clustered around New York Harbor and the Delaware River.

34 This situation is somewhat similar to the Pacific Northwest lumber industry in the 1960s and 1970s, which asserted it could not compete with western Canadian lumber because the Canadians could ship at lower international freight rates to the U.S. East Coast. Washington and Oregon still load significant amounts of wood products on ships, but they all sail to foreign destinations.

35 Shipping rates from Platts, Oilgram Price Report, January through April 2014 issues.


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