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Fuel demand slump may have link to US immigrant crackdown

At this time of year, demand for gasoline in the US is normally rising as people head out for summer vacations in a country that has millions more vehicles than any other.

[NEW YORK] At this time of year, demand for gasoline in the US is normally rising as people head out for summer vacations in a country that has millions more vehicles than any other. But that's not happening in 2017, and one contributing factor could be that undocumented immigrants are driving less.

Part of the blame for the slowdown may be higher pump prices, but Barclays Capital Inc says another possible element is the immigration crackdown. Since President Donald Trump took office in January, the government is increasingly using routine traffic stops by local police to find and deport people without valid papers.

While there's no data tracking the group's driving habits, some say they are staying out of their cars to avoid detection.

"Immigration policy has struck tremendous fear into the undocumented immigrant communities," Paul Cheng, an equities research analyst at Barclays Plc in New York, said in an email. That alone may have reduced gasoline use on the West Coast, where most of the undocumented immigrants reside, by as much as 0.8 per cent in the first four months, the bank estimated in May.

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Domestic demand for gasoline declined in the first half of June, based on the rolling four-week average, according to Energy Information Administration data. In the first five months of 2017, sales at filling stations slid 1.6 per cent, compared with a 0.5 per cent increase in the same period a year earlier, according to Oil Price Information Service data.

Just how much gasoline is used by undocumented workers isn't known. But the populations are significant. In 2014, California had an estimated 2.35 million, and Texas had 1.65 million, data from the Pew Research Center, a nonpartisan think tank, show. That's about 6 per cent of the total population of each state. The total for the US is around 11 million.

Some immigrants say it's just too risky now to get behind the wheel because US Immigration and Customs Enforcement agents are targeting undocumented people identified through routine traffic stops or waiting for a bus.

A 60-year-old janitor from Mexico who's lived in California without proper authorisation since 1995 said he'd rather walk an hour to get to the doctor than drive or ride the bus. He goes to a clinic 10 miles away from home twice a month, he said through a translator in a telephone interview. He asked not to be identified for fear of deportation.

A 34-year-old undocumented vineyard worker in California, who moved to the US five years ago from Mexico, said that before Mr Trump was elected, she and her husband would travel on the weekends. Now they are too afraid to leave home, even to go to the grocery store, she said in a telephone interview via a translator. She also asked not to be identified for fear of deportation.

"Whether it's driving to work and school or being picked up by ICE by the corner of the house, people are just scared to pick up and leave," said Edwin Carmona-Cruz, development director at La Raza Centro Legal, a San Francisco-based legal rights organisation.

Immigration arrests climbed 38 per cent in the 100 days following enactment of Mr Trump's immigration enforcement executive orders in late January, according to ICE. Meanwhile, Southwest border-crossing attempts from Texas to California fell 47 per cent in the first five months of 2017 compared with a year earlier, data from US Customs and Border Protection show.

The White House didn't respond to requests for comment.

Not everyone is convinced there is a correlation between undocumented workers and slipping gasoline demand.

Stopping all immigration by undocumented workers probably wouldn't "move the needle" in terms of fuel demand, David Ellis, research scientist at Texas A&M University's Transportation Institute, said by phone from College Station. "Whatever effect it does have, if at all, would be lost in the noise of the data."

Bloomberg Intelligence Chief Economist Michael McDonough also said he'd be "surprised if it has a tangible impact."

Some of the decrease is probably due to higher prices. During the first quarter, pump prices were 44.4 US cents a gallon higher on average than a year earlier, and so far in the second quarter, they are 14.3 US cents more than over the same period of 2016, according to AAA, the largest US motoring group.

Drivers in the US are critical to the global oil market. Last year, they traveled a record 3.2 trillion miles and boosted motor-fuel consumption to an all-time high, government data show. That helped revive crude prices that had collapsed from US$100 a barrel in 2014 to about US$26 in 2016, the lowest level in almost a dozen years.

But over the past five weeks, prices have been dropping. Oil entered a bear market on Tuesday. It was trading at US$43.56 as of 9:42am in New York. Pump prices are down 4 per cent since the end of May, to US$2.285 a gallon as of June 19, the lowest at that time of year since 2005, AAA data show.

Recent declines in new-home construction in the US may provide some support for the idea of immigrants driving less, as well as fewer industrial vehicles on the road, Phil Verleger, president of oil-market consultancy PK Verleger LLC, said by phone from Denver. A Center for American Progress study shows that 13 per cent of construction workers are unauthorised immigrants.

"Some of those workers are not showing up anymore," Mr Verleger said. "What all of this goes to say is because you have less construction workers, you have less petroleum consumption." Still, Barclays' Mr Cheng says the impact may be short lived, with overall demand growth for gasoline recovering to a zero-to-0.5 per cent rate for the second half of the year.

"We think the illegal-immigrant communities will gradually return to somewhat of their normal routine," he said. "While the fear will unlikely go away, we assume at least some of the demand loss will return."