Grassroot Institute requests 1-year Jones Act waiver for fuel imports

Par Hawaii's suspension of oil imports from Russia underscores the need for Hawaii to achieve greater oil-purchasing flexibility

News Release from Grassroot Institute

HONOLULU, March 3, 2022 >> In response to the parent company of Par Hawaii deciding to suspend Russian oil imports to Hawaii, the Grassroot Institute of Hawaii sent a letter today to President Joe Biden asking that he grant the state a one-year Jones Act exemption for fuel imports.

“For years, the Grassroot Institute has pointed out the vulnerability created by Hawaii’s excessive dependence on foreign oil sources,” Institute President Keli'i Akina said today. “This dependence is largely a consequence of the U.S. maritime law known as the Jones Act.”  

The Jones Act requires all goods shipped between U.S. ports to be on ships that are U.S. flagged and built, and mostly owned and crewed by Americans. As a practical matter, this has made it more expensive to ship goods on Jones Act carriers than foreign vessels. Thus, Hawaii has become almost wholly dependent of foreign-sourced oil, even though generally it would be cheaper to buy U.S. oil, if not for the Jones Act.

Hawaii’s dependence on other countries for fuel is not a new phenomenon. Russian oil typically comprises a quarter to a third of the state’s oil imports. Russia produces large quantities of “sweet crude,” which is favored by Hawaiian Electric for its electricity generation, and the owners of Hawaii's only refinery, Par Hawaii, regularly purchase it from Russia. 

But not anymore. 

As reported by Reuters, Par Hawaii’s parent company, Par Pacific Holdings, of Houston, indicated today, it would cease buying Russian oil for the foreseeable future, making it the first U.S. refiner company to halt Russian oil imports in response to the conflict in Ukraine. 

“We will continually monitor and evaluate our posture on Russian crude over the coming weeks and months. In the meantime, we are turning to other grades of crude, principally from North and South America, to meet fuel production requirements,” Par Hawaii stated. 

Because of the spike in gas prices across the state and Hawaii’s need to maintain a stable energy supply, the institute has asked President Biden to give Hawaii a one-year exemption from the Jones Act for fuel shipments.

Said Akina, “The immediate purpose of this waiver would be to alleviate Hawaii's fuel crisis. But this exemption also would allow policymakers to review the potential effects of long-term updating of the Jones Act. A one-year exemption would prove a useful experiment.” 

Par Pacific’s decision to suspend Russian oil imports and the institute’s waiver request follow a week of media scrutiny of the Jones Act’s role in incentivizing the U.S. to import fuel — especially crude oil — from Russia. 

On Tuesday, March 1, the editorial board of The Wall Street Journal wrote: “Hawaii annually imports several million barrels of Russian crude oil. Depending on the year, this accounts for roughly 10% to 25% of Russian crude shipments to the U.S.

“One reason,” it continued, “is the 1920 Jones Act. As usual with protectionism, this is expensive, and it’s especially hard on outlying areas like Hawaii.” 

Editorials in the Washington Examiner, TIME, USA Today and Forbes also suggested that the law be amended to allow greater U.S. energy security. 

Last week, institute research associate Jonathan Helton pointed out that the Jones Act has never been a good deal for Hawaii.

“With relations between the U.S. and Russia potentially collapsing,” he said, “it very likely could wreak havoc on energy prices in the state.”

Akina today said: “With gas prices rising significantly, it is time for Congress to take swift action on this archaic law. 

“In the long run, we need significant reform to update it for the 21st century. In the immediate future, Hawaii needs a one-year Jones Act waiver for fuel imports.”

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WSJ: Jonesing to Give Up Russian Oil 

F: Mainland America doesn’t rely heavily on Russian oil, but Hawaii does

WE: Foreign countries, including Russia, benefit from WWI-era Jones Act