US Shipping Waiver and Oil Release Unlikely to Cut Prices

The United States is evaluating a potential waiver of the Jones Act alongside a record release of oil stockpiles to mitigate the surge in fuel prices. While these measures aim to provide relief at the pump, analysts suggest they may only slow the rate of increase rather than reverse the trend. The White House announced the consideration of the shipping waiver shortly after agreeing to contribute 172 million barrels to an International Energy Agency (IEA) initiative to release 400 million barrels from global reserves. These interventions respond to significant supply disruptions following the near-complete closure of the Strait of Hormuz by Iran. The closure represents a severe threat to the global economy, as approximately 20 million barrels of oil—roughly 20% of global daily consumption—pass through the waterway. > "The reserves release will slow rather than stop rising oil prices, and offer a temporary salve to the searing burn of rising gasoline prices," said Joe Brusuelas, chief economist at U.S. consulting firm RSM. The scale of the IEA's proposed release, which would average 6.6 million barrels per day if executed over 60 days, remains small compared to the volume currently blocked in the Middle East. Meanwhile, domestic fuel costs have reached multi-year highs. National average retail gasoline prices climbed to $3.60 per gallon, while diesel reached $4.89 per gallon, according to data from AAA. A waiver for the Jones Act, which restricts domestic maritime shipping to American-built and crewed vessels, could provide targeted relief to regions with limited pipeline infrastructure. Alex Hodes, director of market strategy at StoneX Group Inc., noted that the act often contributes to higher costs in areas like California, Puerto Rico, and the Northeast. > "More supply in the U.S. Gulf Coast will now be able to fulfill any short supplies we see in the New York Harbor – which is important during times of demand surges or supply shortages," Hodes said. Despite these efforts, market experts remain cautious about the long-term outlook. Patrick De Haan, an analyst at GasBuddy, emphasized that fuel prices will likely continue to track the upward trajectory of crude oil as the global market struggles to replace the massive volume of lost Middle Eastern production. > "The oil market right now is trying to figure where to find the 20 million barrels per day that is disrupted from the Middle East, and the releases and the Jones Act waiver dont really add up to much of that," De Haan said.