US shipping waiver and release of stockpiles will not ease pain at the pumps, analysts say

By Shariq Khan

NEW YORK, March 12 (Reuters) - A potential waiver to U.S. shipping restrictions and a record release of oil stockpiles by world governments might slow the pain consumers in the U.S. and elsewhere have suffered at the gasoline pumps since the start of the Middle East war, but will not end it, analysts said on Thursday.

The U.S. government is considering waiving the Jones Act that limits shipments between U.S. ports to U.S. vessels only, the White House said on Thursday, a day after the country agreed to contribute 172 million barrels to the International Energy Agency's proposal for 400 million barrels of oil to be released from members' reserves.

The measures are designed to tame the surge in oil and fuel prices caused by Iran's near-complete closure of the Strait of Hormuz, which poses a major threat to the global economy and to U.S. President Donald Trump's Republican Party in midterm elections in November. However, the measures pale compared with the supply disruptions affecting oil markets, analysts said.

"(The reserves release) will slow rather than stop rising oil prices, and offer a temporary salve to the searing burn of rising gasoline prices," said Joe Brusuelas, chief economist at U.S. consulting firm RSM.

More than 20 million barrels per day of oil flow through the Strait of Hormuz, about 20% of global consumption. The IEA's proposed release, for which the time frame has not yet been announced, would total 6.6 million barrels per day if completed over 60 days.

U.S. national average retail gasoline prices hit $3.60 a gallon on Thursday for the first time since May 2024, while diesel prices hit $4.89 a gallon, the highest since December 2022, data from motorist association AAA showed.

JONES ACT WAIVER TO HAVE LIMITED IMPACT ON U.S. FUEL

The potential U.S. Jones Act waiver could help alleviate pressure on fuel supply in some regions that are persistently short, said Alex Hodes, director of market strategy at StoneX SNEX.O.

The Jones Act has long been considered a contributing factor to higher fuel prices in parts of the country that lack pipeline connectivity to the U.S. Gulf Coast refining hub, as there are very few vessels meeting its requirement in service. This leaves California and other markets like Puerto Rico reliant on international imports.

"More supply in the U.S. Gulf Coast will now be able to fulfill any short supplies we see in the New York Harbor – which is important during times of demand surges or supply shortages," Hodes said.

Still, the effectiveness of the potential waiver is ultimately limited to slowing fuel price increases within some U.S. markets, rather than reversing them, GasBuddy analyst Patrick De Haan said. Fuel prices will continue to follow oil upward.

"The oil market right now is trying to figure where to find the 20 million barrels per day that is disrupted from the Middle East, and the releases and the Jones Act waiver don't really add up to much of that," he said.