Obama auto efficiency move a blow to U.S. refiners

NEW YORK (Reuters) - The Obama administration's ambitious plan to raise auto efficiency standards would cut deeply into notoriously voracious U.S. gasoline demand, dealing another blow to a refining sector hard hit by recession and bracing for looming climate regulation.

The White House said Tuesday that President Barack Obama will announce the most aggressive proposal for increasing auto fuel economy standards ever, requiring an average efficiency of 35.5 miles per gallon by 2016.

The measure would cut some 1.8 billion barrels of oil consumption by 2016, the White House said, representing a big drop in the gasoline demand outlook that could hit refiner profitability and force companies to review costly plans to increase production capacity.

"If you're a refiner right now, this is a gut-check," said Kevin Book, analyst at ClearView Energy Partners in Washington. "These are enormous changes."

Book said he expects the proposal would cut some 2.3 billion gallons per year from U.S. gasoline demand in 2016, a 1.6 percent drop.

The outlook could lead refiners to cut more deeply into their investment plans, already sharply reduced since the economic downturn hit profits and darkened the outlook for world energy demand, analysts said.

"It's not a time I would necessarily be building big new refineries," said Sarah Emerson, director of consultancy Energy Security Analysis Inc in Boston.

Among the biggest refinery projects on the books are Motiva Enterprises LLC's plan to more than double the size of its plant in Port Arthur, Texas, and Marathon Oil's plan to expand its plant in Garyville, Louisiana.

The refining sector, however, remains more concerned about the effects of looming climate regulation.

"Are efficiency gains deserved and needed? Absolutely," said Charlie Drevna, head of the National Petrochemical and Refiner Association in Washington. "But right now what we're focusing on are other legislative and regulatory impacts that will have a deleterious effect."

Lawmakers are debating a climate bill aimed at slashing carbon emissions blamed for contributing to global warming.

(Reporting by Timothy Gardner and Richard Valdmanis; Editing by Christian Wiessner)