Energy prices rise despite Jones Act suspension by Trump

Shipping and oil costs have continued to surge a month after former United States President Donald Trump issued a waiver for the Jones Act, a maritime law that prohibits foreign-flagged vessels from transporting goods between US ports.
The 60-day waiver came into effect on March 18, at a time when the movement of energy supplies through the Strait of Hormuz, a strategic waterway carrying roughly 20 percent of the world’s oil and liquefied natural gas supply, was severely disrupted due to the US-Israel conflict with Iran.
Under the Jones Act, goods transported between US ports must be carried on vessels that are US-built, US-flagged, and predominantly US-owned, thereby limiting the number of tankers available for domestic shipments.
The Trump administration had argued that the temporary waiver of the law would reduce energy costs. However, as the waiver approached its 30-day mark, it showed little impact on oil prices.
“It is estimated that the impact would be about 3 cents on the East Coast, and it might increase on the Gulf Coast, but these changes are so minor that they are overshadowed by the spikes in oil prices, which continue to rise,” Usha Haley, a professor of management at Wichita State University, told Al Jazeera.
“It is minuscule, a mere drop in the bucket compared to the significant rise in oil prices.”
Oil prices have continued to climb amid the ongoing conflict, which is disrupting transit through the Strait of Hormuz.
Brent crude futures rose 4 percent on the day amidst a US blockade of Iranian ports, reaching $98.91 after earlier hitting $101.03. US West Texas Intermediate (WTI) crude increased by $2.53, or 2.6 percent, to $99.10.
The US Navy imposed a blockade of Iranian ports on Monday to prevent the movement of oil to and from Iran, following the failure of talks between US and Iranian negotiators to reach an agreement.
The strain is also impacting consumers at US petrol pumps. The American Automobile Association reports that the average price of gas stands at $4.125 per gallon (3.78 liters), a notable increase compared to $3.63 at this time last month.
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Meanwhile, shippers have adapted their routes, with over 34,000 ships diverting from the strait in the past month.
The Containerized Freight Index, the benchmark for shipping container costs, jumped more than 10 percent over the last month and is up more than 35 percent from this time last year, amidst market pressure to find alternative shipping strategies.
In March, shipping giants Maersk and Hapag-Lloyd suspended vessel routes through the strait, a crucial waterway connecting the Gulf of Oman and the Persian Gulf.
Also in March, within days of the commencement of the US-Israel conflict with Iran, several major vessel insurers, including Norwegian insurers Gard and Skuld, and the United Kingdom’s NorthStandard, cancelled war risk coverage for ships traveling through the waterway, thereby dissuading ship owners from traversing the Gulf.
Since then, even though maritime insurance has become available—albeit at ten times the price as before the conflict with Iran—fuel prices are expected to normalize only once traffic through the strait returns to pre-conflict levels, experts have stated.
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