Trump waives US shipping law for 60 days to stabilize oil market

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

The temporary suspension of the Jones Act “allows vital resources such as oil, natural gas, fertilizer and coal to flow freely to US ports for sixty days,” White House press secretary Carolyn Leavitt said in a statement.

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

The Jones Act, signed into law by then-President Woodrow Wilson in 1920, required US ships to transport goods between US ports.

The Act was intended as an attempt to boost the domestic shipping industry after World War I. The legislation has been criticized as a form of protectionism, and some economists have recently argued that it hinders domestic trade.

Trump’s two-month waiver was announced as oil prices resumed their rise due to the Iran war, in which key energy infrastructure came under attack and the Strait of Hormuz, a key global oil shipping route, was effectively closed.

Brent prices, the international benchmark, rose more than 6% on Wednesday morning, reaching $109 per barrel. US oil prices were trading 2.95% higher at $99.05 per barrel.

According to Dalip Singh, chief global economist at asset manager PGIM, there are fewer than 100 Jones Act-compliant vessels, so abandoning the law would free up more international tankers to transport fuel between US ports.

But Singh said the effect of suspending the act may be limited. That’s because of the “inconsistency” in that most US refineries are built to process Middle Eastern crude while the US mainly produces light shale oil.

“Let’s be clear: The U.S. can move fuel more easily now, but it still can’t refine enough to produce for self-sufficiency,” Singh said in a client note on Wednesday.

In recent days Trump has vented his frustration with US allies unwilling to help secure the strait, which is currently effectively blocked by threats of Iranian attacks on shipping. At the same time the president has asserted that the US does not need any assistance for its ongoing military operations.

– CNBC Spencer Kimball And Matt Peterson contributed to this report.