There’s been a great hullabaloo in Hawaii over whether or not a one-year Jones Act waiver is needed to assure an adequate supply of and a stable price for petroleum products in the islands.

A waiver would allow foreign- flag tanker ships to transport domestic petroleum cargoes from other places in the U.S. to Hawaii. Those advocating for a waiver say it’s the best way to compensate for the recent cutoff of Russian crude petroleum oil to the state.

Although the waiver proposals cover both crude oil and refined products, their primary focus is crude. The state’s only oil refinery is the PAR Hawaii Refining facility located in Kapolei. Crude from the Russian Far East has made up 25% to 30% of PAR Hawaii’s feedstock for the past several years.

Russia’s Feb. 24 invasion of Ukraine caused PAR Houston to announce on March 3 that it would no longer purchase Russian crude and only take delivery of those previously arranged cargoes. Subsequently, President Joe Biden’s March 8 executive order banned all U.S. imports of Russian petroleum, natural gas and coal.

The Jones Act is the popular name for the body of federal domestic maritime law that inter alia prohibits foreign ships from engaging in U.S. domestic trade.

There is a sparingly used provision that allows the federal government to issue a discretionary administrative waiver under very restrictive conditions permitting foreign ships to transport domestic cargoes.

Waivers can provide significant relief in emergencies because of the far greater availability of foreign ships including crude oil tankers and their significantly lower freight charges compared to Jones Act shipping.

This assertion is true because the international fleet of oceangoing foreign-flag ships is far larger (53,000 ships) than the Jones Act fleet (96 ships) and the capital cost of foreign-built ships is substantially lower than U.S.-built (ships cost four to five times more to build in the U.S.).

Prominent waiver advocates, Keli‘i Akina, president and CEO of the Grassroot Institute of Hawaii, and Hawaii’s U.S. Rep. Ed Case, each sent letters, on March 3 and March 8, respectively, to Biden requesting a one-year administrative waiver.

Despite the ensuing hoopla, there is no advantage to sourcing domestic U.S. crude transported by foreign-flag tankers to Hawaii. Such a waiver would have no commercial value and would not be used by commercial interests. Thus, the issue is moot.

This can be understood by examining the supply and price of crude in the market place.

Since Biden’s January 2021 inauguration, the U.S. has become a net importer of crude oil, meaning the supply of domestically produced crude is less than domestic demand and the deficit is fulfilled by foreign crude imports. This supply deficit virtually negates the opportunity to draw a prospective Hawaii supply of crude from a domestic surplus.

As the domestic price of crude oil tracks the international market price, there would be no material savings purchasing domestic versus foreign crude.

Perhaps more telling is the incompatibility of the advocates’ proposed one-year waiver with existing law.

Federal statute authorizes waivers to be issued for an initial period of ten days (typically the “load window”) and extended in increments of 10 days for a total of 45 days for “any one set of events.”

Application for a discretionary waiver is made by the commercial party requiring the transportation (typically a cargo owner such as PAR).

If a waiver is granted by Homeland Security that party can charter a suitable foreign-flag ship and proceed with the transaction.

PAR has not expressed an interest in a waiver and have said it intends to compensate for the cutoff of Russian crude by resorting to other foreign sources.

Michael N. Hansen is president of the Hawaii Shippers’ Council representing cargo owners, and a consultant on maritime business.