Oil companies are ignoring the Jones Act to supply US fuel markets

Traders increasingly ship unfinished gasoline components from the Gulf Coast to Buckeye Partners LP’s terminal in the Bahamas, also known as Borco, where they are blended into finished gasoline for export to the US East Coast. The unusual trade is a sign of high demand for products along the coast, home to some of the country’s largest consumer markets.

The trade is a statutory override of the Jones Act, which mandates that cargo moving between U.S. ports must be carried by U.S.-built ships and U.S. crew members.

There is a certain quantity of those ships, which increases the price of those ships.

Since March, at least eight ships have transported gasoline components from the Gulf Coast to the Borgo terminal in the Bahamas, delivering spent gasoline to ports in the Atlantic Ocean, according to shipping data.

Most of the vessels were chartered by BP Plc. BP declined to comment.

In general, sellers on the Gulf Coast profit more by exporting goods or shipping gasoline or diesel to the East Coast via the Colonial Pipeline from Houston to New Jersey, which carries about 2.5 million barrels of gasoline and other fuels per day.

The pipeline is currently blocked as refineries on the US East Coast struggle to meet demand. Those refineries are operating at more than 98% of their capacity, according to the U.S. Energy Information Administration.

Shippers are submitting requests to Colonial to carry refined products through Colonial, but currently those requests exceed the line’s total capacity. Space on the line is more expensive than it has been in years, traders say, adding that shipping with the Bahamas stop is suddenly profitable.

The trade did not violate the Jones Act, but was unusual before Russia invaded Ukraine, and did not occur in 2021, according to available shipping data.

In 2021, the U.S. exported a total of 146,000 barrels of gasoline components to the Bahamas, according to the EIA. In May 2022 alone, that figure was 498,000 barrels, according to the latest data.

Last year, the United States imported 699,000 barrels of spent gasoline from the Bahamas, accounting for 1.8% of all imports of that product for the year. So far, by 2022, the United States has already imported 1.2 million barrels of gasoline from the Bahamas.

In March, Agean Star and Gulf Rastaq loaded fuel components in Houston, unloaded in Borgo, and then delivered finished gasoline to Savannah, Georgia, and Jacksonville, Florida, according to shipping data.

Vessels Navy Luminosity and NAVIG8 Success loaded gasoline components in the Gulf, unloaded them in Borgo, and then transported the spent gasoline to New Jersey and New York, according to vessel data. Several other ships made similar trips during the summer.