CHICAGO -- Why is gasoline demand unusually soft so far this summer? One possible cause could be the Trump administration’s recent crackdown on undocumented immigrants, Bloomberg reported.
Since January, U.S. Immigration and Customs Enforcement (ICE) agents have been harnessing routine traffic stops by local police to apprehend undocumented immigrants. Immigration arrests jumped 38% in the 100 days after President Donald Trump signed an executive order in late January on immigration enforcement. And border-crossing attempts in the Southwest, from Texas to California, dropped 47% in the first five months of 2017 vs. the first five months of 2016, according to U.S. Customs and Border Protection data.
This activity has made many of the United States’ estimated 11 million undocumented immigrants too afraid to drive or travel, to the point it is affecting fuel demand, some suggest. This includes Paul Cheng, an equities research analyst for Barclays PLC, New York.
“Immigration policy has struck tremendous fear into the undocumented immigrant communities,” Cheng told Bloomberg. This could have dampened gasoline consumption on the West Coast, home to most undocumented immigrants, by up to 0.8% in the first four months of 2017, according to the bank’s estimates. According to the Pew Research Center, California has an estimated 2.35 million undocumented immigrants, followed by Texas at 1.65 million.
As the United States enters the summer driving season—typically a high point in gasoline demand—data suggest that 2017 will be atypical. In the first half of June, U.S. gasoline demand fell based on a four-week rolling average, according to the Energy Information Administration (EIA). And data from the Oil Price Information Service (OPIS) shows that in the first five months of 2017, fuel sales slipped 1.6%, vs. a 0.5% decrease in the same period a year ago.
One undocumented immigrant, a 60-year-old janitor from Mexico who has lived in California since 1995, told Bloomberg he would rather walk an hour to his doctor than drive or take the bus. A 34-year-old undocumented immigrant who moved to California in 2012 from Mexico and now works in a vineyard, told Bloomberg she and her husband used to travel on weekends. Since Trump’s election, they have been too afraid to leave home.
“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 for La Raza Centro Legal, a legal rights group based in San Francisco.
A decline in new-home construction could corroborate the theory that undocumented immigrants’ curbed driving is affecting fuel demand, said Phil Verleger, principal of PKVerleger LLC, Denver. According to the Center for American Progress, 13% of construction workers are unauthorized immigrants.
“Some of those workers are not showing up anymore,” Verleger told Bloomberg. “What all of this goes to say is because you have less construction workers, you have less petroleum consumption.”
Others question whether undocumented immigrants’ curb in driving could affect fuel demand significantly. David Ellis, research scientist at Texas A&M University’s Transportation Institute, College Station, Texas, told Bloomberg that halting all immigration by undocumented workers would not “move the needle” on fuel demand. “Whatever effect it does have, if at all, would be lost in the noise of the data,” he said.
Similarly, Bloomberg Intelligence’s chief economist, Michael McDonough, said he would be “surprised if it has a tangible impact.”
One likely factor behind the softer fuel demand would be this year’s higher gasoline prices, said Bloomberg. In first-quarter 2017, retail prices were 44.4 cents per gallon (CPG) higher than in first-quarter 2016, according to AAA. In the second quarter, they are trending 14 CPG higher. More recently, fuel prices have been trending downward, off 4% since the end of May.
Regardless, any effect from the immigration crackdown may ultimately be brief, said Cheng of Barclays. He noted that overall demand is expected to rise to 0.5% growth for second-half 2017.
“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.”