| NEW YORK
NEW YORK Feb 9 A potential increase in gasoline
taxes in several U.S. states could put a dent in demand at the
pumps and mark another setback for a market already flooded with
States where gasoline taxes in some cases have not risen in
decades, are discussing hikes. Conditions might be ripe for the
proposed increases to win approval in state legislatures, tax
experts said this week.
The discussions come at a time when U.S. refiners are still
reeling from their worst year since the shale boom and face the
prospect of weak retail demand for the first time in five years.
Oversupply, in the world's second largest energy consumer, was
rampant in 2016 and this year looks no different.
Any significant increase in taxes is likely to be passed on
to the consumer. Most traders said a small increase in taxes, of
about seven to 10 cents a gallon, could go largely unnoticed by
the consumer, but anything bigger could hurt demand.
Every 10 percent increase in year-over-year retail prices
equates to a 0.8 percent decline in gasoline demand, by one
trading house analyst's estimate.
"It's all a question of how quickly cause and effect can
kick in," said Sandy Fielden, director of oil and products
research at Morningstar.
In October, New Jersey Governor Chris Christie signed into
law a gasoline tax hike of 23 cents a gallon that analysts say
could have lowered incremental demand in the state.
Now states including Alaska, Oklahoma, Mississippi, South
Carolina and Tennessee – all of which voted for U.S. President
Donald Trump in November – are debating gas tax increases in
their state legislatures.
The national average gasoline price at the pump was $2.26 a
gallon on Thursday, according to motorists advocacy group AAA.
Increased production and lower demand has reduced overall
gasoline prices of late.
The new U.S. administration is generally viewed as
pro-energy. If it eases regulations, including biofuels
requirements under the Renewable Fuel Standard Program (RFS),
gasoline demand could jump overnight, assuming gasoline is
cheaper than ethanol, Fielden said.
"It's guaranteed that gas taxes do have an impact on
demand," said Patrick DeHaan, petroleum analyst at Gasbuddy, who
added that it was hard to quantify because of varying factors.
The recent surge in U.S. sales of gas-thirsty sport utility
vehicles (SUVs), helped by low fuel prices, may keep demand
elevated. But more money spent on gasoline would reduce
disposable income for U.S. consumers.
"If prices go up again for whatever reason, whether it's
taxes or the cost of oil, then you would expect that
discretionary spend to crash down again," Fielden said.
Gasoline futures still trade around half the levels
the were in mid-2014 and are expected to rise further as a
global crude oil glut is reduced through OPEC production cuts.
Inventories of gasoline in storage terminals and tanks sit
above 5-year averages and stocks on the U.S. East Coast hit
another record last week.
(Reporting by Devika Krishna Kumar in New York; Editing by Tom