Trump’s Waiver on Domestic Shipping Rules Has Limited Impact on U.S. Oil Supply

BY COMFORT OGBONNA

A recent decision by U.S. President Donald Trump to temporarily allow foreign-flagged cargo ships to transport fuel and other goods between American ports has so far done little to boost domestic oil supply, according to shipping data and energy analysts. Instead of increasing deliveries within the United States, refiners and shipping companies appear to be making greater profits by exporting fuel overseas, where prices are significantly higher.

The policy change came last month when the U.S. administration suspended key restrictions under the Jones Act for 60 days starting March 17. The move was intended to ease pressure on rising fuel prices caused by the ongoing conflict involving Iran by making it easier for shipments from the U.S. Gulf Coast to reach other coastal regions of the country. By allowing foreign-flagged vessels to move cargo between American ports, officials hoped to improve supply flows and help stabilize domestic energy markets.

However, early shipping data suggests the measure has not yet produced the intended results. Instead of increasing domestic deliveries, U.S. refiners dramatically boosted exports of fuel during the same period. Shipments from the Gulf Coast surged to Asia and Europe, and in some cases even reversed long-standing trade routes, with fuel being exported from the U.S. East Coast to European markets.

The Jones Act, a century-old maritime law, requires that goods transported between U.S. ports must travel on vessels that are built, owned, and operated by Americans and sail under the U.S. flag. Limited availability of these vessels has long been blamed for higher transportation costs and supply challenges in certain U.S. regions. Markets such as California and Hawaii, which do not have direct pipeline connections to the refining hubs along the Gulf Coast, have been particularly affected by these logistical limitations.

Despite the temporary waiver of these restrictions, shipments of crude oil, refined fuels, biofuels, and liquid chemicals moving between U.S. ports showed little change. Data from energy analytics firm Kpler indicates that domestic shipments remained largely stable in March at roughly 1.37 million barrels per day, almost identical to February levels.

At the same time, shipments from the Gulf Coast to other U.S. coastal markets actually declined slightly. According to the same data, liquids transported from the Gulf Coast to domestic coastal markets fell to about 770,000 barrels per day in March, compared with 826,000 barrels per day in February.

One major reason behind the trend is the growing demand for U.S. fuel in overseas markets. The Middle East conflict and Iran’s blockade of the Strait of Hormuz have significantly disrupted traditional oil and fuel supplies for Europe and Asia. Many refineries in those regions rely heavily on crude and refined products that normally pass through the strategic shipping route. With those supplies constrained, buyers overseas have increasingly turned to the United States for replacement cargoes.

As a result, American refiners are currently earning far higher profit margins by exporting fuel rather than selling it within domestic markets. Diesel pricing provides a clear example of this dynamic. European gasoil futures, which serve as the benchmark for diesel prices in the region, recently traded above $200 per barrel. In comparison, U.S. ultra-low sulfur diesel futures, the primary pricing benchmark in the United States, were trading below $185 per barrel.

This significant price difference creates a strong incentive for U.S. producers to ship their fuel abroad rather than distribute it domestically. Analysts say these profitable international opportunities are likely overshadowing the policy’s goal of increasing domestic supply.

Tom Kloza, chief energy adviser at Gulf Oil, noted that the current market offers extraordinary arbitrage opportunities across global regions. He said that with such lucrative international trades available, it is uncertain when ships might be redirected to move fuel from the Gulf Coast to northeastern U.S. markets.

The trend is also benefiting shipping companies. Vessel owners are reportedly earning more by sending tankers on longer voyages from the United States to Asia, where refineries are scrambling to secure replacement crude supplies after losing shipments from the Middle East. Asian refiners have been actively bidding for ships operating in the Atlantic Basin so they can transport U.S. oil and compensate for disrupted supplies.

This surge in demand for vessels has tightened the tanker market around the U.S. Gulf Coast and driven freight rates sharply higher. As a result, the cost of shipping fuel—whether on American-flagged or foreign-flagged ships—has risen significantly, further complicating the intended effect of the policy change.

Kloza explained that the dramatic rise in freight costs has made it difficult to see any immediate impact from the waiver of the Jones Act restrictions. According to him, shipping rates surged toward the end of March across all vessel types, limiting the potential benefits of allowing foreign ships to participate in domestic transport.

For now, analysts say global market forces appear to be outweighing domestic policy adjustments. As long as overseas buyers continue offering higher prices and shipping costs remain elevated, U.S. refiners and shipping companies are likely to keep prioritizing international markets over domestic distribution.