Does the Jones Act Raise Hawaii’s Fuel Prices? A Closer Look at the Data

By Sam Norton, CEO of Overseas Shipholding Group.

Colin Grabow of the Cato Institute argues that the Jones Act is the primary cause of high transportation fuel prices paid in Hawaii. His reasoning: Hawaii’s sole refinery, operated by Par Pacific, sources crude oil from distant foreign countries. Without the Jones Act’s restrictions, he claims, crude could be purchased from domestic suppliers at a significantly lower cost.

It’s true that voyages from Libya, Argentina, Nigeria, and Brazil—the sources of Hawaii’s recent crude oil purchases—are longer than a trip from the U.S. Gulf via the Panama Canal. However, anyone experienced in shipping knows that distance is just one factor in transport economics. What truly matters to oil buyers and traders is the delivered cost per barrel, influenced by economies of scale, draft and terminal restrictions, canal fees, and other navigational limitations.

Imagine for a moment that Par could purchase Permian crude from Corpus Christie and ship it to its Honolulu refinery on a foreign flag vessel. The distance to Hawaii from Corpus Christi through the Panama Canal is indeed 40% shorter than from Nigeria or Libya. Grabow would have you believe that waiving the Jones Act would magically result in a reduction of shipping cost of the same 40%. Would that life be so easy. Sadly, it is not.

In reality, draft restrictions at both Corpus Christi and the Panama Canal limit Aframax tankers to about 550,000 barrels per voyage. Panama Canal fees add nearly $900,000 to a round trip, with expediting fees potentially doubling that cost. At current market rates, Par’s freight cost for its imagined voyage on a foreign-flagged Aframax would exceed $5.00 per barrel.

While Jones Act tanker freight costs would be higher for Par, they are not the decisive factor in crude purchasing. Instead, crude shipped from Nigeria or Libya, unrestricted by draft and deadweight limits, can be transported on fully loaded Suezmax tankers—nearly doubling the per-voyage shipment size and reducing shipping costs to under $5.00 per barrel. Similarly, Argentine Vaca Muerta crude can be shipped on a fully loaded Aframax to Hawaii at 40% less cost per barrel than Permian crude under a hypothetical Jones Act waiver—despite the longer distance. Larger cargo capacity and the absence of canal fees significantly reduce the per barrel delivered cost.

Distance does matter in shipping, which is why Hawaii’s remote location raises the cost of nearly everything. However, shipping costs—like most economic realities—are far more complex than simplistic arguments suggest.

Samuel H. Norton is the president and CEO of Overseas Shipholding Group Inc. This piece was originally posted on LinkedIn on March 1, 2025.