Trump waives U.S. shipping law to steady oil market

President Donald Trump issued a 60-day waiver of a longstanding U.S. shipping law in an attempt to stabilize oil markets amid the Iran war, the White House confirmed to CNBC on Wednesday.

The temporary suspension of the Jones Act “will allow vital resources like oil, natural gas, fertilizer, and coal to flow freely to U.S. ports for sixty days,” White House press secretary Karoline Leavitt said in a statement.

The Trump administration “remains committed to continuing to strengthen our critical supply chains,” Leavitt said.

The Jones Act, signed into law in 1920 by then-President Woodrow Wilson, requires that the transport of goods between U.S. ports must be conducted by U.S. vessels.

The law was intended as an effort to grow the domestic shipping industry after World War I. The statute has been criticized as a form of protectionism, and some economists have recently argued that it impedes domestic trade.

Trump’s two-month waiver was announced as oil prices resumed their rise due to the Iran war, in which major energy infrastructure has come under attack and the Strait of Hormuz has been effectively closed.

Trump in recent days has vented his frustration with U.S. allies over their reluctance to help secure the strait, a vital global oil-shipping route that has all but shut down under threat from Iran’s military. The president at the same time has asserted that the U.S. does not need any help with its ongoing operations against Tehran.

Brent prices, the international benchmark, rose 3.83% on Wednesday to close at $107.38 per barrel. U.S. oil prices ended the day nearly unchanged at $96.32 per barrel.

There are fewer than 100 Jones Act-compliant vessels, according to Daleep Singh, chief global economist at asset manager PGIM, so waiving the law frees up many more international tankers to carry fuel between U.S. ports.

But the impact of suspending the act may nevertheless be limited, Singh said. That’s because of a “mismatch” in which most U.S. refineries are built to process Middle Eastern crude while the U.S. mainly produces lighter shale oil.

“Put plainly: the U.S. can now move fuel around more easily, but it still can’t refine enough of what it produces for self-sufficiency,” Singh said in a client note Wednesday.

A coalition of nine U.S. maritime labor groups later Wednesday said they are “deeply concerned” about the Jones Act suspension.

The broad waiver “undermines our national security, weakens military readiness, and hands critical maritime work to foreign vessel operators,” the groups said in a joint statement.

They also argued the move will not meaningfully lower gas prices.

“It has been plainly shown that the primary driver of gasoline prices remains the global cost of crude oil, and multiple analyses demonstrate that domestic shipping accounts for less than one cent per gallon,” the labor groups said.

— CNBC’s Spencer Kimball and Matt Peterson contributed to this report.