A Missed Opportunity: Saving Oil and Foreign Exchange with a Great Reduction in Emissions

Ernst G. Frankel

America, unlike most developed countries, uses road transport for most freight transport. China, Japan, Korea, and Western Europe all make extensive use of water transport (rivers, inland canals, and coastal shipping). In fact, China moves about 80% of its freight transport by water versus 20% for the U.S. and about 40-50% for Western Europe. Though freight transport by rail has become more popular in the U.S. in the last 40-50 years, road transport continues to dominate at a huge additional cost in fuel and environmental impact. Waterborne freight transport is not only much more fuel efficient, but also has much lower direct and indirect costs.

America has coastlines of significant length and a very extensive navigable river system. Though we make extensive use of our rivers such as the Mississippi, Missouri, Tennessee – and more recently the Hudson and Sacramento rivers for barge transportation – our coastal shipping is practically defunct and consists mainly of integrated tug-barge oil transport.

The main reason for this dearth of coastal shipping is the lack of affordable coastal vessels; mainly because under the archaic, obsolete, 80-year-old Jones Act, ships serving the U.S. coastal or cabotage trade must be built in U.S. shipyards, must be U.S. owned, manned, and registered or flagged.

The original purpose of this law was to support the U.S. shipbuilding industry, which it did. The Act actually assured a large American shipbuilding industry before World War II, allowing the U.S. to mass-produce thousands of ships for the Allies. However, after the war, this industry was largely abandoned, as there were few orders, and newly industrialized countries such as Japan, Korea, and then China developed large-scale shipbuilding.

America’s commercial shipyards became largely defunct and inefficient, as fewer and fewer ships were built. In fact, soon after World War II, American commercial shipbuilders required government subsidies to be able to match the price of ships built in East Asian shipyards. The government did provide such “cost differential” subsidies for some years, but such funding soon evaporated and shrunk to a few ships per year, insufficient to even replace the declining U.S. flag cabotage fleet.

Today this fleet is not only very old and small, but it has an average age of over 27 years, making it actually antiquated. As a result, very little domestic freight is carried by coastal water in the U.S. In fact, while China moves about 80% of its domestic freight movements in ton miles by water, we carry about 20%, with the bulk of movements by road (about 52%), and the rest by rail.

Cursory evaluations show that if most of the goods moving from Florida to New England, for example, were carried by coastal shipping instead of by truck, we could readily save about one million barrels of oil per day, or about 5% of U.S. oil consumption and 10% of U.S. oil imports. Savings on a national scale are likely more than twice as large.

Considering the effects of the Jones Act, which was supposed to assure maintenance of a vibrant and healthy U.S. shipbuilding industry and a commercial fleet adequate to support shipping needs of our military, the Act by now is a failure. Not only do we have very few commercial shipbuilders left in the U.S., but a large number of those remaining are now foreign owned. Similarly, practically all the ships used by our military to provide logistic services to the Middle East and South Asia are now foreign built and owned vessels, all contrary to the objectives of the Jones Act.

We could readily import a few hundred modern foreign-built vessels and revitalize our coastal (cabotage) trade in a short period. In fact, the savings in fuel costs alone would readily pay for such an acquisition within 2-3 years. It is curious that while no “built in America” requirements exist in aviation, road, and rail transport for which we import foreign-built equipment, cabotage shipping continues to suffer under the archaic, obsolete, counterincentive Jones Act, which serves no national interest and causes significant economic and environmental damage.

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