Washington State’s Junior Senator, Maria Cantwell (D) has
perked up the ears of the maritime community with recent comments about the
Jones Act.
At a hearing of the Energy and Natural Resources Committee on
July 16th, the senator called for greater transparency in gasoline markets and
refinery shutdowns. Senator Cantwell highlighted a new report demonstrating
that West Coast gasoline prices have broken from historic trends since April
2012. The senator noted that in Washington State, prices had risen 9 cents in
the past week and were 27 cents higher than the national average.
“Washington state prices are among some of the highest in the
nation,” she said, noting that last year’s West Coast refinery fire was
unfairly blamed for a spike in prices (see Pacific
Maritime Magazine, September 2012) saying, “My constituents want to see
more transparency there. Hamburger probably has more regulation on it than
gasoline.”
During a presentation to the committee, Faisel Khan, Managing
Director of Citi Research claimed that one of the reasons for spikes in gas
prices was the Jones Act, and told the committee that the cost of moving crude
by Jones Act tanker could be three to six-times the price of using non-Jones
Act tankers.
“Mr. Khan I wanted to mention the fact that you bring up the
Jones Act as something of a price increase,” the Senator countered. “CitiGroup
has been under investigation and paid penalties both for fraud in the mortgage
market and is now under investigation by the Financial Services Authority (FSA)
for manipulation in gas prices, and the fact that you come here and blame the
Jones Act as some reason why we have high gas prices is just amazing to me.”
Senator Cantwell’s mention of the Jones act had many in the
US maritime industry cheering her defense of the much-maligned legislation. Ed
Morse, chief commodity analyst at Citigroup, has said publicly the Jones Act
adds between $6 and $8 a barrel to transport costs. Morse has said that based
on his calculations, it’s often cheaper for a Gulf Coast refiner to send
gasoline to Brazil than to New York. Recent news stories have interviewed oil
company executives such as Joe Petrowski, CEO of Gulf Oil, who said, “If
foreign owned and flag ships were able to carry gasoline in US waters, the
price of gasoline in the North East and in Florida could be 20 to 30 cents
lower.”
According to shipping and capital magazine Marine Money International, a
mid-sized product tanker costs $130 million in the United States versus $34
million in Korea, and a 4800 TEU container ship would have a price tag of $200
million in the US vs. $46 million in South Korea.
This column doesn’t often see the need to defend the Jones
Act, but we will call attention to the sad story of the 5-year-old MOL Comfort, a state of
the art Korean-built containership that broke in two in the Indian Ocean in
June, thankfully with no loss of life. The two pieces floated separately for a
time while salvors raced to the scene. Too late for the aft section, which sank
in late June and the bow section, which burned and sank in mid-July. Had that
ship been built by a US yard, would she have met the same fate?
