May 4, 2020 9:55AM # Energy Industry Desperation Leads to Jones Act Tanker Use By [Colin Grabow](https://www.cato.org/people/colin-grabow) --- SHARE Something strange is afoot in the energy industry. According to [Reuters](https://uk.reuters.com/article/uk-global-oil-storage-tankers-exclusive/exclusive-traders-book-jones-act-tankers-for-storage-foreign-trips-as-u-s-fuel-glut-swells-sources-idUKKCN2292NM), demand for tankers has reached such stratospheric levels that traders are resorting to that most desperate of measures—using [Jones Act](https://www.cato.org/project-jones-act-reform) ships: > Oil traders are hiring expensive U.S. vessels, normally only used for domestic shipments, to store gasoline or ship fuel overseas, five shipping sources said, in a sign of the energy industry’s desperation for places to park petroleum amid a 30% drop in worldwide demand. > > Billions of people worldwide are living under confinement rules due to the coronavirus pandemic, destroying demand for gasoline and other fuels and creating a supply glut. Storage tanks onshore and floating storage in tankers on the water are rapidly filling, leaving fewer options for traders looking to sock away oil. > > Several shippers said they have started to book Jones Act (JA) vessels for foreign voyages or to store refined products. The century-old Jones Act requires that vessels traveling between domestic ports be owned and operated by U.S. crews, and they are generally more expensive than other vessels. > > “It’s very unusual to use JA tankers for international trips,” one shipping source said. Pause for a moment to reflect on this. International traders with a wide range of vessels to choose from consider Jones Act ships a last gasp option. But these costly vessels are the *only* option when transporting goods by water within the United States. Which helps explain why Americans largely avoid water transport. Despite [40 percent](https://coast.noaa.gov/states/fast-facts/economics-and-demographics.html) of the U.S. population living along coasts, ships are used to transport just [2 percent](https://fas.org/sgp/crs/misc/R44367.pdf) of the country’s freight (barges account for another 4 percent). In contrast, [40 percent](https://op.europa.eu/en/publication-detail/-/publication/ec937c8f-4b6d-462e-9278-8a2d092d24c2/language-en) of the European Union’s internal freight is moved by sea. This is in large part the Jones Act’s handiwork. Instead of being able to select from a vast array of ships offering competitive rates, those seeking domestic waterborne transport are restricted to a [limited](https://www.cato.org/blog/want-americans-buy-us-products-dump-jones-act), [old](https://www.cato.org/blog/old-ships-still-abundant-jones-act-fleet), and expensive fleet undesired by the rest of the world. And what should be a leading means of transporting goods within a country as vast as the United States is a last resort. Americans deserve better. ##### Related Tags [Trade Policy](https://www.cato.org/trade-policy), [Project on Jones Act Reform](https://www.cato.org/project-jones-act-reform) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).