The United States has experienced an energy boom for well over a decade, but Hawaii has been largely left out.
As U.S. oil and other fuels flow around the world, an outdated shipping law called the Jones Act means that the Aloha State obtains most of its energy from far more distant and costlier foreign sources.
The result for Hawaii has been higher gasoline and electricity prices — already among the nation’s most expensive — and more financial strain on local businesses and consumers.
Passed in 1920, the Jones Act restricts domestic water transportation to vessels registered in the United States and constructed in U.S. shipyards. Such vessels are approximately four times more expensive to operate and four to five times more expensive to build than internationally flagged ships, leading to inflated shipping rates.
That’s no small burden for shipping-dependent Hawaii.
Jones Act-compliant shipping from the mainland is so costly that the state’s top sources of low sulfur oil — preferred by its only refinery for electricity generation — are Libya, located 10,500 nautical miles away, and Nigeria, which is 10,000 nautical miles away.
Meanwhile, Gulf Coast oil producers just 6,300 nautical miles away export low sulfur crude oil throughout the Pacific Rim, but thanks to the Jones Act, Hawaii doesn’t purchase a single drop.
Those thousands of extra miles spent importing foreign crude instead of U.S. barrels mean extra costs — and not just for oil.
Hawaii also relies on tankers to supply the state with refined products such as jet fuel and gasoline, in addition to production from Par Hawaii’s Kapolei refinery. That should mean a good bit of business for Washington state, home to the country’s fifth-largest refining capacity. Yet last year, three times more tankers arrived in Hawaii from South Korea, located 4,100 nautical miles away from Honolulu, than the West Coast, just 2,400 nautical miles away.
Sometimes the Jones Act means that sourcing American energy isn’t just more expensive, but outright impossible. For instance, the United States is one of the world’s leading exporters of liquefied petroleum gas — essentially, propane — and counts Asian countries as among its top customers. But Hawaii imports from as far away as West Africa and Chile’s southern tip.
The reason: There are no Jones Act-compliant LPG tankers to transport it from U.S. sources.
It’s a similar story with liquefied natural gas, which a recent Hawaii State Energy Office report identified as the most cost-effective fuel for the state’s transition to renewable energy. America is the world’s leading exporter of LNG, yet a lack of Jones Act-compliant vessels means that domestic supplies aren’t an option for Hawaii. Even China imports American LNG.
So why does this inefficient federal maritime law remain in place?
Jones Act advocates claim the law generates business for U.S. ships and shipyards. But applying the law to Hawaii’s energy imports has generated paltry returns. Last year, visits by Jones Act-compliant tankers to Hawaii averaged fewer than two per month.
Meanwhile, the total number of ships that comply with the law has more than halved since 1980, while uncompetitive U.S. shipyards account for only one-tenth of 1% of global output. Furthermore, U.S. shipyards haven’t built a tanker of any type since 2017, haven’t built an LNG tanker in more than 40 years, and have never built an LPG tanker.
Hawaii will almost certainly never be an inexpensive place to live. But significantly reforming the Jones Act — if not repealing it entirely — would be a commonsense means of reducing the state’s energy costs and easing the financial burden on Hawaii families.
Colin Grabow is a Grassroot Scholar affiliated with the Grassroot Institute of Hawaii and associate director of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies in Washington, D.C.
