Gas Prices and the Jones Act: A Market Reality Check
By Sam Norton, CEO of Overseas Shipholding Group.
Gasoline prices in the US are on the rise and the Trump Administration is “looking at all options” to reverse this inconvenient collateral effect of war in the Middle East. A reflexive impulse of those seeking easy answers to a complicated problem is to boldly suggest that Jones Act transportation costs are a principal cause of high fuel prices and that a waiver of the law’s requirements would magically result in a sharp decline in the price consumers pay at the pump. Nothing could be further from the truth. A careful look at the current state of international market freight rates shows that, in fact, substituting a foreign-flag tanker on a domestic route currently served by a Jones Act tanker would more than likely result in an increase in the delivered cost of fuel.
A quick primer on how tanker freight costs are quoted is needed to understand this point. Tanker operators and shippers rely on a unified system of establishing payment of freight for oil tankers, called Worldscale, covering over 350,000 possible voyage permutations. Worldscale flat rates are calculated so that, after allowing for port costs, bunker costs and canal expenses, the net daily revenue is the same for all voyages. Tanker owners and charterers simplify negotiations for freight by quoting and accepting voyages on Worldscale “points”, where each Worldscale point is the equivalent of 1% of the flat rate established by the Worldscale Association. The theory is that freight quoted at, say WS200, will yield the same daily time charter equivalent to an owner, irrespective of which voyage is actually performed. While in practice this theory is complicated by multiple other variables, it is useful to understand the theory when considering comparative freight costs.
While foreign-flagged tankers are almost never able to carry domestic US cargoes, Worldscale does provide WS flat rates for those voyages in its tables. By referencing these flat rates against current market WS rates, it is possible to estimate the impact of substituting a foreign-flag vessel for a Jones Act vessel on a similar voyage.
The 2026 Worldscale flat rate for a voyage from Houston to New York is $10.88 per tonne. The WS rate quoted in the market today for a comparable voyage is WS410 – I.e. 410% of the flat rate – equating to $44.61 per tonne or about 14.5 cents per gallon. The same move on a Jones Act tanker today would cost about 13.5 cents per gallon. A similar comparative calculation would show that the cost of freight from Houston to Fort Lauderdale at currently quoted WS rates also yields a delivered cost per barrel of a penny more than delivery on a Jones Act tanker. So much for easy solutions….
For those genuinely interested in reducing fuel costs for consumers, it is essential to understand how freight markets actually function. Policy decisions based on assumptions rather than market realities risk doing more harm than good.
This piece originally appeared on LinkedIn on March 10, 2026.
Gasoline prices in the US are on the rise and the Trump Administration is “looking at all options” to reverse this inconvenient collateral effect of war in the Middle East. A reflexive impulse of those seeking easy answers to a complicated problem is to boldly suggest that Jones Act transportation costs are a principal cause of high fuel prices and that a waiver of the law’s requirements would magically result in a sharp decline in the price consumers pay at the pump. Nothing could be further from the truth. A careful look at the current state of international market freight rates shows that, in fact, substituting a foreign-flag tanker on a domestic route currently served by a Jones Act tanker would more than likely result in an increase in the delivered cost of fuel.
A quick primer on how tanker freight costs are quoted is needed to understand this point. Tanker operators and shippers rely on a unified system of establishing payment of freight for oil tankers, called Worldscale, covering over 350,000 possible voyage permutations. Worldscale flat rates are calculated so that, after allowing for port costs, bunker costs and canal expenses, the net daily revenue is the same for all voyages. Tanker owners and charterers simplify negotiations for freight by quoting and accepting voyages on Worldscale “points”, where each Worldscale point is the equivalent of 1% of the flat rate established by the Worldscale Association. The theory is that freight quoted at, say WS200, will yield the same daily time charter equivalent to an owner, irrespective of which voyage is actually performed. While in practice this theory is complicated by multiple other variables, it is useful to understand the theory when considering comparative freight costs.
While foreign-flagged tankers are almost never able to carry domestic US cargoes, Worldscale does provide WS flat rates for those voyages in its tables. By referencing these flat rates against current market WS rates, it is possible to estimate the impact of substituting a foreign-flag vessel for a Jones Act vessel on a similar voyage.
The 2026 Worldscale flat rate for a voyage from Houston to New York is $10.88 per tonne. The WS rate quoted in the market today for a comparable voyage is WS410 – I.e. 410% of the flat rate – equating to $44.61 per tonne or about 14.5 cents per gallon. The same move on a Jones Act tanker today would cost about 13.5 cents per gallon. A similar comparative calculation would show that the cost of freight from Houston to Fort Lauderdale at currently quoted WS rates also yields a delivered cost per barrel of a penny more than delivery on a Jones Act tanker. So much for easy solutions….
For those genuinely interested in reducing fuel costs for consumers, it is essential to understand how freight markets actually function. Policy decisions based on assumptions rather than market realities risk doing more harm than good.