Oil companies circumvent Jones Act to supply US fuel markets

Traders are increasingly sending unfinished gasoline components from the Gulf Coast to the Buckeye Partners LP terminal in the Bahamas, also known as Borco, where they are mixed with finished gasoline for shipment to the east coast of the United States. This unusual trade is a sign of strong demand for produce along the coast, home to some of the country’s largest consumer markets.

The trade is a legal circumvention of the Jones Act, which stipulates that goods moving between US ports must be transported by US-built ships manned by US crews.

The number of these ships is limited, which increases the cost of these expeditions.

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

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

Typically, Gulf Coast sellers make larger profits by exporting products or sending gasoline or diesel to the East Coast through the Colonial Pipeline from Houston to New Jersey, which carries about 2.5 million barrels of gasoline and other fuels per day.

This pipeline is currently blocked as refineries on the US East Coast struggle to meet demand. These refineries are operating at more than 98% capacity, according to the US Energy Information Administration.

Shippers submit requests to Colonial to transport refined products through Colonial, but at present these requests exceed the line’s total capacity. Space on the line is more expensive than it has been in years, traders said, making it suddenly profitable to transport goods with the Bahamas stopover.

This trade does not violate the Jones Act, but was rare before Russia’s 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 EIA. 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 waste gasoline from the Bahamas, representing 1.8% of all imports of this product for that year. So far, the United States has already imported 1.2 million barrels of gasoline from the Bahamas by 2022.

In March, the Agean Star and the Gulf Rastaq loaded fuel components in Houston, offloaded them at Borco and then delivered finished gasoline to Savannah, Georgia, and Jacksonville, Florida, the data shows. shipping.

The Nave Luminocity and Navig8 Success ships loaded gasoline components in the Gulf, offloaded them at Borco, then transported the spent gasoline to New Jersey and New York, according to shipping data. Several other ships made similar voyages over the summer.