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Don't Blame Jones Act for California Energy Costs

Wall Street Journal US Business •
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The framing of your editorial “Keeping Up With the Jones Act Waiver” (Aug. 15) is misleading. The claim that the waiver has “let California obtain more fuel from Gulf of Mexico refineries” thereby narrowing the gap “between the state’s gasoline prices and the national average by about 25 cents per gallon” suggests the Jones Act normally adds $0.25 per gallon at the pump. Neither is the case.

First, the 25-cent shift appears to reflect gasoline prices rising faster outside California, not any meaningful reduction in shipping costs. California’s gasoline remains about 20% above pre-Iran war levels. Second, shipping gasoline from Korea to Los Angeles currently costs about 12.5 cents per gallon—roughly 25% less than from Houston, even on foreign-flag vessels under the waiver.

But for economic distortions from reduced crude-oil availability due to the war in Iran, California’s demand would likely be met by Asian exporters if transport costs were the only issue. The war has disrupted supply chains, and waivers can be appropriate for genuine shortages. However, California’s gasoline costs are driven by state regulatory policy and temporary Asian export constraints.

The benefits of continuing waivers would flow to refiners and distributors, sidelining the U.S. maritime industry and allowing Chinese and Russian operators to roam freely without enforcement. A policy that enriches the oil industry while weakening the domestic maritime industry is a bad bargain.