The economics of US oil protectionism is a big problem and with the Obama administration at the helm, it is difficult to envision a non political resolution . As US oil production increases and the spread between Brent and WTI may widen, and the need for cost efficient transportation becomes more acute
An article from the October 11, 2012, Financial Times, stated, " One advantage of exporting the crude to Canada is that the US Jones Act demands more expensive US flagged ships for domestic routes. Poten & Partners, a ship broker, estimates it would cost less than $1.50 per barrel to ship crude in a foreign-flagged medium-sized Aframax tanker from Texas to the largest Canadian refinery at St. John, New Brunswick. A shorter journey from Texas to refineries in Philadelphia recently costs $4.50 a barrel." "This is not about exports or imports. " said Lucian Pugliaresi, president of Energy Policy Research Foundation in Washington. "It is about transportation and processing efficiency."
The protectionist Jones Act requires shippers transporting goods between two points in the United States to use vessels built in the U.S., owned by U.S. companies, and manned by U.S. Crews, even if more affordable options are available. So, with the vast preponderance of ships flying international flags and manned by foreign sailors, the Jones Act benefits a small group of americans at the expense of many. It is estimated that LNG shipments to Hawaii and Puerto Rico add 30% to the cost of LNG. Consumers bear those cost.
The Obama administration did not create the Jones Act, but if politicians want to affordable energy, governmental barriers to competition should be repealed. |
