Oil companies bypass Jones Act to supply US fuel markets
Merchants increasingly send unfinished gasoline components from the Gulf Coast to Buckeye Partners LP terminal in the Bahamas, also known as Borco, where they are blended into finished gasoline for shipment to the US East Coast. The unusual trade is a sign of high demand for products along the coast, which is home to some of the largest consumer markets in the country.
The trade is a legal circumvention of the Jones Act, which states that goods transported between US ports must be carried by ships built in the US and staffed by US crew members.
There is a limited quantity of those ships which increases the cost of those shipments.
Since March, at least eight ships have transported gasoline components from the Gulf Coast to the Porco terminal in the Bahamas, to deliver spent gasoline to ports along the Atlantic, according to shipping data.
Most of the ships were chartered by BP Plc. BP declined to comment.
Sellers on the Gulf Coast typically make more money by exporting products, or by sending gasoline or diesel to the East Coast via the Colonial Pipeline from Houston to New Jersey, which carries nearly 2.5 million barrels of gasoline and other fuels per day.
That pipeline is currently closed as refineries on the US East Coast struggle to meet demand. These refineries are operating at more than 98% of their capacity, according to the US Energy Information Administration.
Shippers submit requests to Colonial to transport refined products through Colonial, but these requests currently exceed the line’s total capacity. Traders said space on the line is more expensive than it has been in years, making moving freight with the Bahamas on hold surprisingly profitable.
This trade does not violate Jones’ Act, but it was uncommon prior to the Russian invasion of Ukraine, and did not occur in 2021, according to available shipping data.
In 2021, the United States exported a total of 146,000 barrels of gasoline components to the Bahamas, according to the Energy Information Administration. In May 2022 alone, the most recent data available, that number was 498,000 barrels.
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 that 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 them at Borco and later delivered finished gasoline to Savannah, Georgia, and Jacksonville, Florida, according to shipping data.
Shipping data showed that the ships Nave Luminocity and Navig8 Success loaded gasoline components in the bay, then unloaded in Porco and transported the spent gasoline to New Jersey and New York. Several other ships made similar voyages during the summer.
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