Americans don’t use Russian oil because it makes economic sense, they use it because bad policies have made American oil for American consumers make less sense. Chief among these bad policies is the Jones Act, which strangles the ability of American oil producers to get their product to consumers in the same country. At Cato Institute, Colin Grabow explains:
With imports of Russian oil (as well as coal and natural gas) now banned, the country’s refineries must decide on alternative sources. The good news is that there are U.S. grades of crude oil well‐suited for refineries on the East and West Coasts. The bad news is that the protectionist Jones Act stands in the way of getting this oil from where it is produced in the United States to other parts of the country where it is needed.
Passed in 1920, the Jones Act restricts the domestic waterborne transportation of goods—including energy products—to vessels that are U.S.-flagged and built as well as mostly U.S.-crewed and owned. Meeting these requirements isn’t cheap. A U.S.-built tanker is estimated to cost nearly four times more than one built overseas ($150 million versus $40 million) while operating costs are also significantly higher.
The inevitable result is expensive shipping rates that can make it cost‐prohibitive to transport oil within the United States, thus tipping the scales in favor of imports.
Beyond costs, most Jones Act‐compliant tankers are smaller medium range tankers typically used to transport refined products rather than crude oil (switching between the two is no easy task). Of the tankers in the Jones Act fleet, only 11 are larger Suezmax tankers designed for crude oil transport and these are almost exclusively used to ship crude from Alaska to West Coast refineries.
The seemingly obvious solution here would be for the Biden administration to waive the Jones Act to enable the cost‐effective purchase of U.S. crude, but that’s less straightforward than it may seem. While the executive branch can waive the Jones Act via requests from the Secretary of Defense, that authority was pared back by the 2020 National Defense Authorization Act (NDAA). Previously allowed for reasons of national defense—a term sufficiently flexible that it allowed for Jones Act waivers following natural disasters such as Hurricane Maria—the 2020 NDAA (much to the delight of pro‐Jones Act lobbyists) restricted waivers requested by the Secretary of Defense to those deemed “necessary in the interest of national defense to address an immediate adverse effect on military operations [emphasis added].”
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