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What is the Jones Act? And why might waiving it help ease gas ‘supply crunch’?


The Biden administration said Tuesday it has begun considering a temporary waiver of the Jones Act, a key U.S. shipping law, to offset a “supply crunch” sparked by the recent cyberattack against the largest fuel pipeline system in the U.S. The move would allow foreign tanker ships to carry petroleum products up the Eastern Seaboard from the Gulf Coast, as some gas stations in the Southeast begin running out of fuel. It follows the weekend shutdown of the 5,500-mile Colonial Pipeline, which was hit by a ransomware attack, throwing a wrench in a crucial artery for U.S. energy markets and the supplier of about 45% of fuel consumed by the East Coast. What is the Jones Act? The Jones Act dates back to 1920 and governs the rules around shipping and trade in the U.S. and its island territories, with an aim of protecting American business from foreign competition. The law has been waived several times in the past, specifically in response to crises like hurricanes along the Gulf Coast and other events, said Jason Bordoff, co-founding dean of the Columbia Climate School. The U.S. government waived it in November 2012, after Hurricane Sandy slammed the East Coast, causing power outages and fuel shortages. “A Jones Act waiver would help move additional fuel supplies from the U.S. Gulf Coast to the Eastern Seaboard by allowing the use of non-U.S.-flagged vessels, which are cheaper and more plentiful, to transport the gasoline and diesel,” Bordoff told MarketWatch. “Markets will be comforted to know the Biden administration stands ready to waive the Jones Act if needed, but at the same time, the fact that the administration is beginning to contemplate a waiver several days into the crisis may undermine confidence in the markets about how quickly Colonial can really restart the pipeline.” What to watch for next As a first step, the Biden administration said the U.S. Department of Transportation was in the process of determining if enough U.S. ships were available to carry petroleum products from the Gulf to the East Coast to justify a waiver allowing the use of foreign vessels. That process is expected to take a few days. The U.S. also said it could lift restrictions on rules around fuel transport on federal railroads and highway to help offset supply disruptions. What the News Means for You and Your Money Understand how today’s business practices, market dynamics, tax policies and more impact you with real-time news and analysis from MarketWatch.

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