Old US shipping law adds to costs of oil refiners

[NEW YORK] As the first US oil condensate exports head to Asia from the Gulf Coast, crude producers and refiners are exploring ways to get around a century-old law that makes it three times more expensive to ship by water between US ports than to sail to a foreign port.

The Jones Act, originally passed to protect the US maritime industry, restricts passage between US ports to ships that are US-built, US-flagged and US-crewed. If oil exports pick up pace while the Jones Act is left in place, US crudes discount to Brent will likely narrow from its US$8 average through 2014, while domestic refiners' shipping costs will remain high, putting them at a disadvantage to foreign competitors.

"For heaven's sake, if we're going to take the crude and export it all around the world, please let us export it to the US East Coast," PBF Energy executive chairman Tom O'Malley said. "We cannot do that if you can export crude oil to Europe at a cost of US$2 a barrel and we have to use a Jones Act ship which cost us US$6 or US$7 a barrel."