The Jones Act and gasoline prices

What it is

The Jones Act, formally Section 27 of the Merchant Marine Act of 1920, restricts coastwise shipping between U.S. ports to vessels meeting four requirements:

• Built in a U.S. shipyard
• Owned by U.S. citizens or U.S.-controlled entities (at least 75 percent)
• Crewed by U.S. citizens or permanent residents
• Flagged under U.S. registry

The Act's stated purpose is to maintain a domestic merchant marine fleet and shipbuilding capacity for national-defense reasons. In practice, Jones Act-compliant vessels are typically two to four times more expensive to build and operate than foreign-flagged equivalents, and the U.S. shipbuilding sector produces only a handful of new oceangoing vessels each year.

What it costs drivers

Our regression analysis uses a "non-contiguous state indicator" that absorbs all factors specific to Alaska and Hawaii. The coefficient is approximately $0.46 per gallon — a large effect, but one that bundles several mechanisms: the Jones Act shipping premium itself, the geographic distance from continental refineries, Hawaii's single-refinery market structure, and Hawaii- and Alaska-specific state policies not captured by the tax variable. The Jones Act is probably the largest single component, but the indicator does not separate it from the other factors.

How it affects gasoline supply

The Jones Act creates an unusual market for U.S.-flagged petroleum tankers. There are roughly 60 active Jones Act-compliant tankers and barges capable of carrying refined products. Demand for these vessels concentrates around routes connecting U.S. refining hubs (the Gulf Coast and the Mid-Atlantic) to non-contiguous markets and to coastal cities that occasionally need waterborne supplements. Spot rates for Jones Act tanker time are typically two to four times higher than for comparable foreign-flagged vessels.

For Hawaii, the practical consequence is that gasoline is more economically imported from foreign refineries (in Asia and elsewhere) than from continental U.S. refineries, even though Hawaii is closer to California than to Asia. Foreign-flagged tankers can carry fuel from foreign ports to U.S. ports under foreign trade rules; only the inter-U.S.-port leg is restricted by the Jones Act. The result is that Hawaii's gasoline supply is partially structured around foreign sourcing, which adds shipping cost and supply-chain complexity.

For Alaska, the Jones Act effect is muted because most Alaska gasoline comes from Alaska's own refineries (Petro Star, Marathon Petroleum, Tesoro) using Alaska North Slope crude. The Jones Act premium shows up mainly in occasional supplement deliveries from West Coast refineries to remote Alaska communities.

History

The Jones Act was enacted in 1920 in the wake of World War I, when shipping shortages had hampered U.S. mobilization. The Act's sponsor, Senator Wesley Jones (R-WA), explicitly tied the law's domestic-shipping requirements to national defense. The Act has been amended in modest ways since but remains substantively the same as in 1920.

Temporary Jones Act waivers have been granted during national emergencies, most recently after Hurricane Maria devastated Puerto Rico in 2017 and during the 2022 Colonial Pipeline outage. Each waiver allowed foreign-flagged tankers to carry fuel between U.S. ports for short periods, lowering retail prices in affected areas. In March 2026, President Trump waived the Jones Act for a 60-day period in response to Hurricane Eden's effect on Eastern U.S. fuel supply.

The debate

Supporters of the Jones Act, including U.S. shipbuilders and maritime labor unions, argue the law preserves a critical national-defense capability and supports U.S. jobs in shipbuilding and shipping. The U.S. Department of Defense has historically defended the Act on these grounds.

Critics, including the Institute for Energy Research, the Cato Institute, the Heritage Foundation, and a wide range of economists across the political spectrum, argue the Act raises consumer costs in Hawaii, Alaska, and Puerto Rico, distorts U.S. petroleum markets by making coastal shipping uneconomic, and provides only marginal national-security benefit. The Government Accountability Office has estimated the Act costs U.S. consumers about $1.8 billion per year.

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