Impacts of the Jones Act on US Petroleum Markets

Abstract

We study how the Jones Act—a US regulation passed in 1920 that constrains domestic waterborne shipping—affects US markets for crude oil and petroleum products. We collect data on US Gulf Coast and East Coast fuel prices, movements, and consumption, and we estimate domestic non-Jones shipping costs using freight rates for Gulf Coast exports. We then model counterfactual prices and product movements absent the Jones Act, allowing shippers to arbitrage price differences between the Gulf and East Coasts when they exceed transport costs. Eliminating the Jones Act would have reduced average prices for East Coast gasoline, jet fuel, and diesel by $.63, $.80, and $.82 per barrel, respectively, during 2018–19, with the largest price decreases occurring in the Lower Atlantic. The Gulf Coast gasoline price would increase by $.30 per barrel. US consumers’ surplus would increase by $769 million per year, and producers’ surplus would decrease by $367 million per year.