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Trump endorses 25 cents/gal gasoline tax increase: sources

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Trump endorses 25 cents/gal gasoline tax increase: sources

US President Donald Trump endorsed increasing the gasoline tax by 25cents/gal during a meeting with members of Congress Wednesday morning,according to sources familiar with the discussion.

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The endorsement comes as White House and congressional Republicans areweighing the first increase in the federal gasoline tax in 25 years, aproposal that could dampen demand.

The increase in the tax, which has been 18.4 cents/gal since 1993, wouldoffset some of the cost of Trump's $1.5 trillion infrastructure plan, whichwas unveiled Monday.

"The gas tax has its pros and cons, and that's why the president isleading a thoughtful discussion on the right way to solve our nation'sinfrastructure problems," a White House official said Wednesday in anemailed statement.

On Tuesday, Transportation Secretary Elaine Chao told reporters that anincrease in the gasoline tax was "on the table," but noted that anincrease in the tax was "not ideal," since it would be regressive,impacting low-income workers adversely. Ray LaHood, a transportation secretary during the Obama administration, has been pushing for a gas tax increase for years as a way to pay torepair crumbling highways. This week, Congressman Bill Shuster, aPennsylvania Republican and chairman of the House TransportationCommittee, indicated an increase may be the best option for funding theinfrastructure bill.

"I'm open to any way to get real revenues," Shuster said in an interviewTuesday with Fox News.

US motor gasoline consumption is forecast to average 8.9 million b/d thismonth, up from 8.67 million b/d in January and just below the 8.99million b/d average in February 2017, according to the US EnergyInformation Administration's Short-Term Energy Outlook.

EIA forecasts US motor gasoline consumption to average 9.33 million b/din 2018 and 9.40 million b/d in 2019, peaking at 9.78 million b/d inAugust 2019.

What impact an increase in the federal gasoline tax may have on domesticdemand is unclear, but higher taxes, combined with fuel efficiencyincreases, will likely cause a dip, according to Kevin Book, managingdirector with ClearView Energy Partners.

"Our models project falling gasoline demand due to incremental efficiencygains in the incumbent light-duty fleet," Book said. "Whether pricesincrease endogenously (as they have, with oil) or because of new taxation(which is also happening at a state level), US drivers' newfound pricesensitivity suggests that higher pump prices could reduce gasoline demandeven faster."

HOW HIGH?

In January, the US Chamber of Commerce called for a 25 cents/gal increaseto the gasoline tax. The tax increase would be increased 5 cents/yearover five years and raise $394 billion over 10 years, the Chamberestimates.

American Trucking Associations have called for a 20 cents/gal increase inthe federal gas tax, which would generate $340 billion over a decade,according to Chris Spear, ATA's president and CEO.

Frank Macchiarola, downstream group director for the American PetroleumInstitute, said that if Congress moves to raise the gasoline tax, itshould also find a way to make drivers of electric vehicles contribute tothe infrastructure fund.

"I think there should be some examination of the fact that the gasolinetax applies to drivers across the country," he said Tuesday at theRenewable Fuels Association's National Ethanol Conference in San Antonio."The National Highway Trust Fund ... is not currently assessed to EVautomobiles. That's certainly an area policy makers should take a look atas we assess how we're funding our infrastructure."

Mike McAdams, president of the Advanced Biofuels Association, said ahigher gasoline tax would make biofuels more attractive and give a boostto the industry after the prolonged oil price slump created toughcompetition at the retail pump.

McAdams said it would also be a departure for this Congress to passlegislation that pays for itself.

"We spent quite a bit of money between the tax bill and the budgetagreement, and we haven't raised the gasoline tax in quite some time," hesaid. "If there was all of a sudden an urge by Congress to try befiscally concerned, a 50-cent gasoline tax ... might do a great deal formaking us competitive with folks in the gasoline world, in terms ofraising the overall price of fuel."

Tara Billingsley, a partner at Jim Massie & Partners and former seniorstaff member on the Senate Energy and Natural Resources Committee, saidthere's a joke in Congress about a lawmaker who "wasn't against raisingthe gasoline tax, he was just against voting to raise the gasoline tax." Book with ClearView said an increase in the federal gasoline tax was not"particularly viable, especially in an election year."

While the federal gasoline tax has not changed since 1993, 26 states andthe District of Columbia have moved to increase state gas taxes,according to a July report from the National Conference of StateLegislatures.

Currently, 18 states have set gas taxes at 32 cents/gal or higher,according to the NCSL. Pennsylvania has the highest tax at 58.2cents/gal, while Alaska has the lowest at 12.25 cents/gal, according tothe NCSL.

(This is an update of a story that ran on platts.com at 4:04 pm EST/2104 GMT)

-- Brian Scheid, brian.scheid@spglobal.com

-- Meghan Gordon, meghan.gordon@spglobal.com

-- Edited by Annie Siebert, newsdesk@spglobal.com