The repeal in 2015 of a 40-year ban on the export of crude oil from the United States has left a significant dent in the US tanker industry, according to a US watchdog.
A report released by the Government Accountability Office (GAO) on Friday detailed how US refineries – particularly those on the East Coast that lacked access to cheaper transportation options such as pipelines – had to pay more to receive more expensive domestic crude oil from the United States. – tankers and barges marked before the ban was repealed, when US crude oil was selling at depressed prices compared to foreign crude.
Ships carrying cargo between U.S. ports – known as the Jones Act Ships, named after a law requiring these domestic goods to be carried on ships not only flying the American flag, but also built in the United States, owned in the United States and with American crews – can cost almost five times as much to operate as foreign-flagged vessels, mainly because of the cost of employing American crews.
After the ban was repealed, the price of domestic crude oil rose relative to the price of foreign crude oil for U.S. refineries, resulting in lower demand for Jones Act tankers and barges. U.S. crude shipped by Jones Act tankers and barges from the Gulf Coast to the East Coast fell 57% in 2016, according to data from the US Energy Information Administration. At the same time, imports of foreign crude oil to the East Coast rose 35% in 2016, likely to replace the decline in domestic crude oil shipments from the Gulf Coast, according to GAO.
“Taken together, these two factors led to a decline in demand for Jones Act tankers to transport US crude oil from points in the United States in the years following the repeal of the ban,” notes The report.
Shipping companies that continue to operate Jones Act tankers to transport crude oil have been forced to significantly reduce their shipping rates, according to people interviewed by GAO.
The effect of lifting the ban has also affected the shipbuilding industry in the United States, due to the Jones Act’s nation-building requirement. After the repeal, one of the two remaining U.S. shipyards capable of building Jones Act crude tankers saw its employment drop by 90%, according to a representative of the shipping industry.
Further, “the boom in building tankers to transport domestic crude oil failed before the repeal of the export ban left shipping companies with excess shipping capacity, which has since been used to transport other products (such as refined products), recovered. for parts or idling, ”according to the report.
A maritime representative interviewed said that about 80% of the Jones Act fleet was built between 2007 and 2016. As they have a lifespan of 30 years, “it is unlikely that there will be a need to build new ones. tankers during this decade given the drop in demand. ,” he said.
None of those interviewed said the repeal of the ban directly affected the movement of refined petroleum products by tankers and barges Jones Act, according to the GAO, because the repeal had limited effects on production, the export and import of domestic refined petroleum products.
“Refined products are still being shipped by Jones Act tankers and barges between parts of the United States, such as refineries in Texas and Louisiana, to consumers in Florida, due to the lack of pipelines connecting those states.