Faced with soaring gasoline prices President Biden sent a letter to energy firm executives this week requesting “concrete ideas that would address the immediate inventory, price, and refining capacity issues in the coming months—including transportation measures [emphasis added] to get refined product to market.” ExxonMobil swiftly responded that the administration could take two actions in the short term to boost energy supplies: adjustments of fuel specifications and waivers of the Jones Act, which restricts domestic shipping of fuels and other products to American-made/owned/crewed ships and—as Cato scholars frequently note—increases gas prices.
Just how much of an increase is the subject of some debate, but a new J.P. Morgan calculation shows it would be significant. In particular, the firm’s analysts find that suspending the Jones Act to allow the domestic shipment of petroleum on less expensive foreign ships could save drivers on the East Coast 10 cents per gallon.
While some apparently think this is a meager sum, they ignore two big things:
- As my colleague Scott Lincicome noted recently (and as the current TV news incessantly reminds us), Americans care a lot—a lot —about gas prices and are willing to drive miles out of their way to save a few cents at the pump. We also tend to obsess over small movements in gas prices, especially when they cross salient (though admittedly arbitrary) thresholds like, say, $5 per gallon. Thus, as purely an emotional (and political) matter, saving “only” 10 cents per gallon would surely affect millions of inflation-weary U.S. drivers.
- Second, these savings quickly add up—especially when one considers just how much gasoline the East Coast consumes. According to the Energy Information Administration, consumption of gas last year in PADD 1—essentially the East Coast—was roughly 117 million gallons per day, or nearly 43 billion gallons per year (total U.S. consumption in 2021 was almost 135 billion gallons). Thus, reducing the price of each gallon of gas by 10 cents would save American drivers over $4 billion dollars per year. That sum represents not only a little weekly relief for individual families and workers during a painful inflationary period, but also collectively big savings for the U.S. economy—savings that would be redirected toward other, more productive endeavors (such as spending at other American businesses that are struggling in today’s uncertain economy).
Washington power‐brokers thus have a powerful tool to provide real relief at the pump—relief that’s also costless for everyone except the special interests that are currently enriched by Jones Act protectionism. We’re about to find out what scares politicians more: shipping lobbyists or irate drivers.
