Trump's Jones Act waiver: Will the move curb rising fuel costs?

US President Donald Trump announced on Wednesday a two-month waiver of the Jones Act, a longstanding US shipping law, in an effort to stabilize oil prices amid US-Israeli strikes on Iran. But an expert says the move is unlikely to work.

What is the Jones Act and why has the White House suspended it?

The Jones Act is a 1920 law stipulating that goods shipped between US ports should be transported on American-owned ships that are built in America, use an American crew and fly the American flag. Originally intended to buttress the US shipping industry after World War I, the law has often been criticized as a protectionist measure.

The waiver is seen as a desperate bid to tackle the energy crisis and tame fuel costs, both of which have spiraled since the US and Israel launched their joint attack on Iran, bringing maritime traffic in the Strait of Hormuz to a grinding halt. 

"This action will allow vital resources like oil, natural gas, fertilizer, and coal to flow freely to U.S. ports for 60 days, and the administration remains committed to continuing to strengthen our critical supply chains," White House press secretary Karoline Leavitt said in a Wednesday statement. On the same day, Brent crude, the global benchmark, climbed 3.83%, closing at $107.38 per barrel. 

Li Haidong, a professor at China Foreign Affairs University, said that the temporary exemption allows foreign-flagged ships to operate on US domestic routes, helping to lower shipping costs and speed up deliveries. 

According to Li, three key factors lie behind the Trump administration's move: 

First of all, rising oil prices are likely to take a toll on Republicans in this year's midterm elections.

Secondly, the measure seeks to stabilize oil prices by reducing shipping costs and accelerating deliveries after allowing foreign tankers to operate in US ports.

Thirdly, the waiver aims to secure the supply of critical resources.

Will the Jones Act waiver curb rising oil prices?

However, the waiver is unlikely to curb surging fuel costs as the move does not target the root causes, according to Li. 

The measure primarily allows more vessels to transport supplies between US ports, but it does not increase the overall volume of crude oil or refined products entering the country, leaving energy shortages – the main driver of price spikes – unaddressed, Li said.

The surge in oil prices is rooted in a global energy supply crisis triggered by US-Israeli attacks on Iran, Li said. The conflict has effectively disrupted traffic through the Strait of Hormuz, one of the world's most critical oil shipping routes, sparking market panic. 

Implementing the exemption could face resistance within the US, as it may undermine the interests of certain domestic industry groups, Li noted. The American Maritime Partnership, a maritime industry lobbying group, criticized the waiver, warning it could jeopardize American workers.

Rising fuel costs could also have political consequences. 

A recent Yahoo/YouGov poll indicates that President Trump may already be feeling the political fallout from rising US gas prices linked to the Iran conflict. The survey of 1,699 adults, conducted from March 12 to 16, found that 66% disapprove of the president's handling of fuel costs.

The poll also shows that 80% of Americans – including 71% of Republicans – believe gas prices are too high, and 67% expect them to rise further in the coming months. Nearly half (45%) of respondents expect prices to climb "a lot." Among those anticipating higher prices, 60% blame Trump, far more than those who blame Iran (13%) or oil companies (12%).

The poll data echoed Li's warning that soaring oil prices may erode public confidence in the Trump administration and could deal a blow to Republicans in this year's polls.

The economic outlook is also concerning. Before the attack on Iran, Moody's Analytics had estimated a 49% chance of a US economic recession within the next 12 months. Analysts now warn that rising oil prices due to the conflict could push the probability of recession above 50%, according to Euronews.