Each day the United States both exports and imports millions of barrels of crude oil and petroleum products. Although a seeming paradox, much of this activity makes perfect sense. Highly sophisticated refineries on the Gulf Coast, for example, import heavy, high sulfur grades of crude oil that are better optimized for processing while lighter, sweeter grades are exported from the region. Similarly, comparative advantage and the pursuit of higher profits may lead US refineries to focus their production on certain fuel types—including for export—while imports are used to meet other domestic fuel needs.
But that’s not the whole story.
Beyond these market-driven forces, another contributor to this simultaneous exporting and importing is the Jones Act, a protectionist law that restricts domestic shipping to US-built and flagged vessels. That adds significant costs.
In 2017, tankers that complied with the law were found to be approximately 2.8 times more expensive to operate than foreign-flagged ships (just over $5 million more per year). Such vessels are estimated to be four times more expensive to build (over $200 million compared to approximately $50 million overseas).
That makes for pricey domestic shipping and a competitive edge for imports able to access more efficient internationally flagged vessels.
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