There is no escaping the economic vulnerability Hawaii faces due to its remote location. That is not the aim a requested waiver from the federal Jones Act would fulfill.
However, assuming it’s implemented for a limited term as described, it could at least enable needed flexibility in acquiring alternative, domestic sources of oil for a state that has been fairly dependent on foreign petroleum imports for many years.
That issue has become an acute problem in the already inflationary economic environment, intensified further by the Russian invasion of Ukraine. In the course of punishing international sanctions heaped on Russia — including President Joe Biden’s ban on Russian energy imports — Par Pacific Holdings Inc., owner of Hawaii’s oil refinery, has stopped the purchase of Russian crude oil for the state’s supply.
Up to one-third of Hawaii’s crude oil has come from the Russian Far East, so this is a deep cut. There’s some doubt that even a partial waiver from the Jones Act would lead to a reduction in prices at the pump, or for other large-scale users of oil, including Hawaiian Electric. But widening the lens through which we look for sources would be wise at this pivotal moment.
Hawaii Congressman Ed Case sent Biden the request for Hawaii to receive a “limited, targeted” waiver from the act, also known as the Merchant Marine Act of 1920. It’s a concern that comes up perennially for this state. The law requires vessels carrying cargo between two U.S. ports to be U.S.-flagged and built domestically.
Case is asking the president to waive the law for Hawaii “for the duration of our necessary ban on Russian oil.” Historically, such waivers have been given during military conflicts and natural disasters. Case also has submitted legislation in Congress seeking a standing waiver on the same grounds.
His argument is that the best replacement source is domestic oil that, under the law, would have to travel on one of the limited number of domestic ships at greater expense than on one of the more numerous non-U.S.-flagged vessels.
Some can and do contest that assertion. Hawaii economist Paul Brewbaker’s company TZ Economics partnered with the Boston-based economics firm Reeve &Associates to publish a 2020 study, “The Impact of the Jones Act on Hawaii.” It concluded that the act “has no significant impact on the cost of living in Hawaii.”
The findings were based on analyses of the competitiveness of freight rates in the U.S.-Hawaii market, the benefits of the jobs in shipping industries and other factors.
In addition, whenever the idea of repealing the Jones Act is floated, its defenders are quick to speak up, and with good reason. Hawaii’s geolocation that presents economic challenge is also a strategic position that needs protection.
In an “Island Voices” column the Honolulu Star-Advertiser published Friday, retired Adm. Paul Zukunft, former Coast Guard commandant, said that U.S. merchant mariners “would be displaced by foreign nationals who pose a threat to national security.” That is a point not to be lost in ongoing discussions about Hawaii’s own energy supplies.
But again, the risks implicit in a waiver targeted to petroleum cargo transport would be manageable, if it is set up to replace the reliable supply now restricted.
The standoff with Russia underscores one of the many reasons why Hawaii is working to extricate itself from fossil-fuel dependency more broadly. It is for national defense, as well as the state’s own secure supplies of energy.
But now, an international crisis provides the impetus to review a century-old law. It still may serve a larger purpose in the long term, but for the immediate future, Hawaii could use some room to move.
