Oil prices and the Jones Act

Anyone who has been in the workboat industry a long time knows that the energy industry and its commodity prices are cyclical. The bad news continued this week with reports showing the largest week-to-week onshore rig count decline in six years.

The good news for the workboat industry is that in contrast to the onshore count, the Gulf of Mexico rig count continues to be fairly stable.

Another cyclical “industry” is the effort to repeal the Jones Act. It seems there is a new attack on the 95-year-old law every year or two. The latest comes from the noted Jones Act hater Sen. John McCain, R-Ariz. He has introduced an amendment to the Keystone Pipeline bill that would eliminate the U.S. construction requirements of the Jones Act. McCain’s position pretty much mirrors the Heritage Foundation’s anti-Jones Act stance.

McCain and the Heritage Foundation say the Act drives up shipping costs, increases energy costs, stifles competition, and hampers innovation in the U.S. shipping industry. Also, they say, the Jones Act fleet fails to meet the needs of the U.S. military, which routinely charters foreign-built ships to fulfill additional sealift needs. Essentially, McCain says the U.S. economy and the military would be better served without the Jones Act.

On other side are Rep. Linda Sanchez, D-Calif., and scores of other House and Senate members. Essentially, they side with the American Maritime Partnership’s pro-Jones Act view that says the Act is critical to the country’s military strategy and to its economic security. The AMP says that 40,000 Jones Act vessels operate in the domestic trades that support nearly 500,000 U.S. jobs and add almost $100 billion in annual economic impact. AMP also claims that five indirect jobs are created for every one direct maritime job, which results in more than $28 billion in labor compensation.

I am not sure where either side gets their numbers or “factual” information. The answer probably lies somewhere in the middle. But that is not important here. What is important is if the Jones Act is in trouble. Well, not this time.

I don’t think it will be repealed since Sen. McCain attached it to the Keystone Pipeline bill, which won’t get the needed 60 votes in the Senate. Even if it does, President Obama will veto it. But be prepared for more repeal attempts in the next two years. The Senate is now controlled by the GOP and McCain now chairs the Armed Services Committee. Stay tuned.

About the author

David Krapf

David Krapf has been editor of WorkBoat, the nation’s leading trade magazine for the inland and coastal waterways industry, since 1999. He is responsible for overseeing the editorial direction of the publication. Krapf has been in the publishing industry since 1987, beginning as a reporter and editor with daily and weekly newspapers in the Houston area. He also was the editor of a transportation industry daily in New Orleans before joining WorkBoat as a contributing editor in 1992. He has been covering the transportation industry since 1989, and has a degree in business administration from the State University of New York at Oswego, and also studied journalism at the University of Houston.

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