Moonlighting in the Sunshine State

A recent, This Week In Petroleum, published by the US Department of Energy’s Energy Information Agency (EIA) suggested that a shift in Florida’s gasoline supplies could be underway. Florida is essentially entirely dependent on gasoline imports from neighboring states or other countries, the majority of which require marine transportation. The EIA suggested that due to a shortage in Jones Act tonnage and high transportation costs, incremental gasoline cargoes would likely be increasingly sourced from foreign markets. Although it is true that spot market freight rates for tankers under the Jones Act are at all-time highs, the cost of transportation for units moving gasoline from places like Houston, Pascagoula, Mississippi and Convent, Louisiana to Florida has been well-established through term charters for quite some time. Additionally, the volatility in foreign-flag freight rates breaks any semblance of sustained arbitrage. Nestled between the trading and storage hubs of Houston and New York, Florida serves as a balancing point for foreign and domestic freight rates, driving seemingly disparate markets toward parity. Download here