New York's fuel inventory is so low that shippers are paying big premiums to get supplies there by boat

• New York's gasoline inventories are so low that more seaborne cargoes are arriving, Bloomberg first reported.
• Shipping via boat typically carries a steeper price tag compared to pipeline flows.

Shippers are paying a steep premium to get fuel to New York by boat as stockpiles hit record lows, Bloomberg first reported.

The Empire State typically relies on the Colonial Pipeline to get fuel supplies from the US Gulf Coast, but it is already near full capacity. In addition, supplies from Europe have steadily declined recently.

So now two ships carrying fuel are expected to arrive in New York by the end of the week from Texas and Louisiana, according to Bloomberg vessel tracking.

The Merchant Marine Act of 1920, also known as the Jones act, requires that goods traveling between US ports must be carried by American-made ships and staffed by a US crew. But complying with that century-old law costs extra, translating to a premium of $4.54 a barrel compared to similar routes in the international market.

For now, shippers are willing to pay up as fuel inventories in New York have hit the lowest ever since record-keeping began nearly three decades ago. Meanwhile, demand has been rising as gasoline prices come off highs reached earlier in the summer.

Meanwhile, some some oil companies are finding a legal workaround to the Jones Act by transporting unfinished gasoline products from the Gulf Coast to Buckeye Partners LP's terminal in the Bahamas, according to Reuters. Then, those supplies are blended into finished gasoline and shipped off to the US East Coast.

This trade was uncommon before Russia invaded Ukraine, and did not occur at all last year. But since March, at least eight cargoes have completed the route and then delivered fuel to ports along the Atlantic, according to Reuters.