Apr 18, 2024 · 40m · catalyst
How an obscure, 100-year old law is disrupting U.S. energy
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Catalyst, host Shayle Kann and Cato Institute fellow Colin Grabow examine how the century-old Jones Act distorts U.S. fuel logistics, inflates shipping costs, and creates substantial roadblocks for offshore wind development.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Shayle holds 22% of the talking time here. How this is scored →
Shayle as informed peer 3.7 Guest teaching 6.1 Guest disagreement 1.4 Shayle pushing back 0.6
speaking balance: gold is Shayle, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 37:40 Colin slams domestic energy transport absurdity
Colin passionately denounces the policy as insane and ridiculous, arguing that preventing Americans from accessing domestic LNG requires no deep analysis to recognize as an outright failure.
Hardest push from Shayle ▶ 36:01 Host questions whether guest is tilting at windmillsShayle bluntly challenges the feasibility of Colin's mission, asking if he is just shouting into the wind given the law has survived over a century of opposition.
Biggest teaching moment ▶ 20:00 Alaska crude arbitrage via exempt Virgin IslandsColin details how shipping Alaskan crude twice the distance around South America to the exempt Virgin Islands was one-third the cost of shipping to the US Gulf Coast, catching the host completely off guard regarding territorial exemptions.
Shayle holds their own ▶ 13:49 Host connects shipping decline to road freight emissionsShayle introduces rigorous energy and climate domain expertise by quantifying the environmental penalty of shifting waterborne cargo onto high-emission trucking networks.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Shayle as informed peer | Guest teaching | Guest disagreement | Shayle pushing back | Why |
|---|---|---|---|---|---|---|
| Origins and Historical Context of the Merchant Marine Act of 1920 | 4 | 6 | 1 | 0 | Colin walks through the origin of Section 27 of the 1920 Merchant Marine Act and historical loophole-closing. Shayle demonstrates domain expertise by drawing an apt comparison to modern solar panel tariff circumvention cases in Southeast Asia. | |
| Economics of U.S. Shipbuilding and Cost Disparities | 3 | 6 | 1 | 1 | Colin details the severe cost escalation in domestic shipbuilding from a 20 percent premium a century ago to 400-500 percent today. When Shayle probes why this occurs, Colin explains capital equipment economies of scale and dispels the misconception that high American wages are the primary cause. | |
| Domestic Freight Mode Shift and Environmental Ramifications | 5 | 5 | 1 | 0 | Shayle interjects clean-tech expertise by raising the greenhouse gas emissions per ton-mile impact of shifting freight from maritime routes to road trucking. Colin agrees and notes that less than two percent of domestic freight moves by ship due to high costs. | |
| Distortions in U.S. Fuel and Liquefied Natural Gas Markets | 3 | 7 | 1 | 1 | Colin outlines the distortion in LNG and crude markets where East Coast refineries import from Africa rather than the Gulf Coast, and Puerto Rico buys gas from Nigeria and Spain. Shayle is taken aback when learning the US Virgin Islands is exempt from the law while Puerto Rico is strictly bound. | |
| Challenges Posed to the Emergent Offshore Wind Industry | 4 | 6 | 1 | 0 | Shayle directs the focus toward offshore wind deployment barriers. Colin explains how the lack of Jones Act-compliant wind turbine installation vessels forced Dominion Energy to stage installation operations out of Canada, turning weeks of work into nearly a year. | |
| Sponsor Message: Bloom Energy On-Site Power | 5 | 6 | 2 | 1 | Following the sponsor break, Shayle synthesizes the policy options between revitalizing US shipbuilding through subsidies versus full repeal. Colin firmly argues against industrial subsidies, citing four decades of failed construction differential subsidies and military captive market distortions. | |
| Political Dynamics and Maritime Special Interest Lobbying | 3 | 7 | 2 | 0 | Colin illustrates the classic public choice dynamic of concentrated benefits and dispersed costs, citing the fierce lobbying of maritime associations and political retaliation faced by Hawaii Representative Ed Case. Shayle is surprised to learn Alaska has a statutory gubernatorial duty to lobby for repeal despite its delegation backing the act. | |
| Historical Government Studies on Economic Impact | 3 | 7 | 2 | 0 | Shayle asks whether government bodies have quantified the economic toll. Colin exposes flaws in past International Trade Commission reports, which artificially minimized reported damages by multiplying cost deltas against shipping volumes that the law had already crushed. | |
| Future Reform Outlook and Conclusion of Interview | 3 | 5 | 2 | 2 | Shayle challenges Colin on whether reform advocates are merely shouting into the wind against an entrenched century-old statute. Colin makes a case for emerging momentum driven by China competition, heavy salvage deficits highlighted by the Baltimore bridge collapse, and obvious LNG market absurdities. |
Statements from this episode (16)
Grabow: Jones Act requires domestic ships be US-built, owned, and crewed
“The Jones Act basically mandates that if you're going to transport something by water within the United States, you have to use a vessel that meets four conditions. The vessel has to be flagged and registered in the United States. It has to be at least 75% own…”
Grabow: 1920 Merchant Marine Act aimed to offload surplus WWI ships
“The United States built a lot of ships during the war. Most of them were delivered after the war was over with. The government found hundreds of, had hundreds of ships on its hands they didn't know what to do with. So they passed the Merchant Marine Act. Prima…”
Grabow: US-built container ships cost five times more than international builds
“By the 19 thirties, it was up to a 50% premium for U.S. Built ships. By the 19 fifties, a U.S. Built ship was double the cost of one built abroad. By the 19 nineties, it was triple the cost of one built abroad, and today, a U.S. Built container ship is somewhe…”
Grabow: Foreign shipyard workers earn more than Americans despite building cheaper ships
“Well, the data suggests, actually, that workers in South Korea and Japan and Europe, they make more than Americans, and yet the ships are still significantly cheaper, so that's interesting.”
Grabow: Ships transport only about 2% of US freight
“If you look at The data, something like only two percent of freight in the United States is transported by ships. You add in barges, that's like another four percent. So we're well under 10% for water transport in the U.S.”
Grabow: East Coast refineries import more foreign oil than domestic oil
“East Coast refineries, say, in the Mid-Atlantic they import more oil from places like Libya or the Middle East or Nigeria than they do from Texas, from the Gulf Coast.”
Grabow: Zero Jones Act-Compliant LNG Tankers Exist in the United States
“We can't transport it by water to other parts of the United States because there are no LNG tankers that comply with the Jones Act.”
Grabow: U.S. LNG Tankers Cost $700M to Build Versus Under $200M in South Korea
“A few years ago, the Wall Street Journal estimated that to build an LNG tanker in the United States would cost around seven hundred million dollars, whereas at that time you could buy one for, I think, less than two hundred million in South Korea.”
Grabow: Hawaii imports LPG from West Africa due to domestic ship shortage
“Hawaii uses LPG, and they import it from as far away as West Africa because they can't get it from the U.S. Mainland because, again, there are no ships to transport it.”
Grabow: U.S. lacks any Jones Act-compliant offshore wind installation vessels
“But in the United States, we can't
Do that because we don't have any vessels wind turbine installation vessels that comply with the Jones Act.”
Grabow: Dominion staged Virginia offshore wind pilot from Canada
“And in fact this is what Dominion Energy did for their offshore wind demonstration project off the coast of Virginia a few years ago
They installed, I think, two turbines, and they did the whole, they ran the whole thing out of Canada, I think St. John, Canad…”
Grabow: U.S. commercial shipbuilding has been globally uncompetitive since the Civil War
“And U.S. Shipbuilding has been uncompetitive literally, you know, since roughly the end of the Civil War. So, you know, a hundred, a 150 years, something like that.”
Grabow: Military contracts, not the Jones Act, generate most U.S. shipyard revenue
“Navy contracts, which this is unrelated to the Jones Act, but they also have you know, Navy and military contracts are really their bread and butter. Jones Act is kind of a sideshow for most of them. The majority of revenue is from government contracts.”
Grabow: Alaska law mandates lobbying against Jones Act despite delegation's support
“It is written into Alaskan state law, it is a duty of the governor to lobby for the Jones Act's repeal, and yet all three members of the Alaska delegation are pro-Jones Act.”
Grabow: 1980s GAO study found Jones Act cost Alaska 2% of income
“And the GAO, they did a study back in the eighties about the cost to Alaska with the Jones Act.
They concluded that it cost Alaskans, it was something like the equivalent of two percent of the state's income was the cost of the Jones Act.”