At a time of year when gasoline demand should be soaring and inventories tumbling, neither is happening and economists, policy-makers, and politicians are perplexed. However, Barclays Capital has an idea - it's because undocumented immigrants are scared to get behind the wheel.
Gasoline demand is puking when it should be peaking in the middle of summer-driving-season...
And Inventories are surging when they should be tumbling...
So what is different this time? What could have caused this 'change'. A sudden surge in Tesla drivers? Stagnant incomes and an increasingly crushed US consumer amid higher prices at the pump? Retail worker layoffs? No, Barclays Capital has the perfect scapegoat...President Trump's immigration crackdown...
As Bloomberg reports, 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 Capital Inc. in New York, said in an email.
That alone may have reduced gasoline use on the West Coast, where most of the undocumented immigrantsreside, by as much as 0.8 percent in the first four months, the bank estimated in May.
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 percent of the total population of each state. The total for the U.S. is around 11 million.
Some immigrants say it’s just too risky now to get behind the wheel because U.S. Immigration and Customs Enforcement agents are targeting undocumented people identified through routine traffic stops or waiting for a bus.
“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 organization.
And so there you have it - the US economy is so fragile that unless it allows illegal immigrants to drive, the energy sector will collapse and drag the nation into recession?
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.”
Finally, Dennis Gartman notes that it is gasoline that weighs most heavily upon the energy complex, and points out a shocking anomaly in prices this year (that we suspect has very little to do with illegal immigrants)...
A friend who shall remain anonymous, but Rich you know who you are... was kind enough to send us the following bit of data “stolen” from the always brilliant folks at Bespoke Research denoting the fact that in the past 13 years the price of gasoline at-the-pump has risen on average by 22% from late March into early June. Indeed, in 12 of those 13 years the price did in fact rise.
This year, however, the price since late March has fallen and although a decline of 1.8% is not material, it is certainly very interesting. To see gasoline prices weaken right into the height of driving season tells us volumes about demand and certainly it is not rising. Certainly it is not bullish.