Why the US east coast imports oil despite shale boom

12 Oct 2017   USA

The US has been shipping its shale oil riches to different parts of the world, including Canada and India, inspiring White House officials to muse about American “energy dominance”. But one place that is buying very little of this crude is the officials’ backyard. Last week as the US reported a record 2m barrels a day in crude oil exports, refineries located up the highway from Washington on the east coast imported about 900,000 b/d, mainly from Africa. A big reason is the Jones Act, a 97-year-old US law that requires all ships starting and ending their voyages on US coasts to be American-flagged, built and crewed. The Trump administration waived the Jones Act for 10 days, following the devastation inflicted by hurricanes in Puerto Rico, triggering renewed calls for its repeal. What animates critics in the oil market about the Jones Act is that it increases the cost of shipping crude from the Gulf coast to the east coast above the rate charged by foreign-flagged carriers. That helps incentivise exports from Texas oilfields and imports by refiners in the east. The reliance on shipping reflects the fact that no crude oil pipelines link the oilfields of the central US to the east coast. “It’s basically a constraint on the efficient operation of the oil market,” says Sandy Fielden, director of research for commodities and energy at Morningstar.

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