By John Seiler
Across Southern California, some gas stations are changing their prices upward twice in one day. And the increases keep coming. Especially hard hit are the poor and middle class, whose budgets increasingly are eaten up by the boosts in costs for commuting to work.
As I write on March 7, AAA’s Gas Prices tracker pegs California’s average price for regular at $5.34 a gallon, the highest ever recorded, and up 66 cents in just a week from $5.28.
And it’s up $1.59 from a year ago, when it was just $3.75 a gallon. For a fill-up of 20 gallons a week, that’s a cost increase of $31.80 a week. Or $1,684 a year. For a two-car family, it’s double, more than $3,000 a year gone. Poof.
That’s after-tax income. Where are families supposed to get that money?
A big problem is California itself. That $5.34 price on March 7 is $1.27 more than the national average of $4.07.
California drivers are punished especially hard due to high taxes and regulations. The worst is the 50-cent tax increase passed in 2017 by the Democrat-controlled Legislature and signed into law by Democratic Gov. Jerry Brown. Other states have better roads with lower taxes.
California also receives little oil from the Eastern states, meaning it’s severely dependent on its own production and imports from other countries, especially Russia, Iraq and Saudi Arabia. President Biden currently is considering banning imports from Russia, which would hit this state hardest.
California’s Monterey shale oil formation boasts 15 barrels of oil, twice as much as North Dakota’s Bakken formation. But state regulations allow only limited drilling. And last April, Democratic Gov. Gavin Newsom directed the state Department of Conservation’s Geologic Energy Management to end all new fracking permits in the whole state before January 2024, now less than two years away.
He said, “As we move to swiftly decarbonize our transportation sector and create a healthier future for our children, I’ve made it clear I don’t see a role for fracking in that future and, similarly, believe that California needs to move beyond oil.”
All that goes on top of Democratic President Biden’s termination of America’s oil independence, partly stemming from his cancellation of the Keystone XL pipeline.
The increase in energy prices is going to affect not just gas at the pump, but everything, Raymond Sfeir told us; he’s the director of the Anderson Center for Economic Research at Chapman University. First to be affected will be other commodities prices, such as lumber and cement.
“When these materials prices go up, then the production cost is higher,” he said. “Eventually part of that increase in producer price increases is shifted to the consumer. This is true at the national level, and at the state and county levels. These increases we see right now are going to persist. Many products using those raw materials are going to show higher prices down the road.”
For example, increased gas and diesel prices paid by farmers and truckers will translate into higher food prices. Food prices also are affected directly by higher costs for fertilizer, which is made from petroleum, and much of which is imported from Russia.
Then there are the interest rates that affect home mortgages and business and car loans. To fight inflation, Sfeir pointed out, on March 2 Federal Reserve Board Chairman Powell announced before Congress his plan to increase its Fed Funds interest rate 0.25 percent. The current rate is 0.08 percent.
But “the increase in oil prices and gasoline prices will push up transportation prices in general,” he said. “That’s going to make inflation for March worse than otherwise would have been the case. As raw materials purchases from Russia might be affected downward, that will cause inflation to be higher than before the war. It will encourage the Federal Reserve Board to keep increasing rates for the rest of the year as well.”
Higher interest rates discourage home and auto purchases. And if those rates go high enough, they spark a recession. The Fed pushed up the Fed Funds rate from 1 percent in 2004 to 5 precent in 2007, bringing on the deep recession of the next several years. That Subprime Recession, as it’s sometimes called, tanked home prices in California by as much as 75 percent in some areas, although less along the coast.
Because of its high regulatory and tax costs – and its political its leadership’s absurd obsession with banishing fossil fuels – California is not ready for a commodities-led recession. Especially hard hit will be the poor and middle-class, who drive the long commutes in ancient, wheezing cars. And whose budgets for food already have been decimated by the price increases from the COVID supply disruptions.
The pain is going to be immense.
John Seiler blogs at johnseiler.substack.com
Soaring Gas Prices Killing California’s Poor and Middle Class
By John Seiler
Across Southern California, some gas stations are changing their prices upward twice in one day. And the increases keep coming. Especially hard hit are the poor and middle class, whose budgets increasingly are eaten up by the boosts in costs for commuting to work.
As I write on March 7, AAA’s Gas Prices tracker pegs California’s average price for regular at $5.34 a gallon, the highest ever recorded, and up 66 cents in just a week from $5.28.
In Orange County, the average price per gallon is $5.51
The statewide average is up $1.59 from a year ago, when it was just $3.75 a gallon. For a fill-up of 20 gallons a week, that’s a cost increase of $31.80 a week. Or $1,684 a year. For a two-car family, it’s double, more than $3,000 a year gone. Poof.
That’s after-tax income. Where are families supposed to get that money?
A big problem is California itself. That $5.34 price on March 7 is $1.27 more than the national average of $4.07.
California drivers are punished especially hard due to high taxes and regulations. The worst is the 50-cent tax increase passed in 2017 by the Democrat-controlled Legislature and signed into law by Democratic Gov. Jerry Brown. Other states have better roads with lower taxes.
California also receives little oil from the Eastern states, meaning it’s severely dependent on its own production and imports from other countries, especially Russia, Iraq and Saudi Arabia. President Biden currently is considering banning imports from Russia, which would hit this state hardest.
California’s Monterey shale oil formation boasts 15 barrels of oil, twice as much as North Dakota’s Bakken formation. But state regulations allow only limited drilling. And last April, Democratic Gov. Gavin Newsom directed the state Department of Conservation’s Geologic Energy Management to end all new fracking permits in the whole state before January 2024, now less than two years away.
He said, “As we move to swiftly decarbonize our transportation sector and create a healthier future for our children, I’ve made it clear I don’t see a role for fracking in that future and, similarly, believe that California needs to move beyond oil.”
All that goes on top of Democratic President Biden’s termination of America’s oil independence, partly stemming from his cancellation of the Keystone XL pipeline.
The increase in energy prices is going to affect not just gas at the pump, but everything, Raymond Sfeir told us; he’s the director of the Anderson Center for Economic Research at Chapman University. First to be affected will be other commodities prices, such as lumber and cement.
“When these materials prices go up, then the production cost is higher,” he said. “Eventually part of that increase in producer price increases is shifted to the consumer. This is true at the national level, and at the state and county levels. These increases we see right now are going to persist. Many products using those raw materials are going to show higher prices down the road.”
For example, increased gas and diesel prices paid by farmers and truckers will translate into higher food prices. Food prices also are affected directly by higher costs for fertilizer, which is made from petroleum, and much of which is imported from Russia.
Then there are the interest rates that affect home mortgages and business and car loans. To fight inflation, Sfeir pointed out, on March 2 Federal Reserve Board Chairman Powell announced before Congress his plan to increase its Fed Funds interest rate 0.25 percent. The current rate is 0.08 percent.
But “the increase in oil prices and gasoline prices will push up transportation prices in general,” he said. “That’s going to make inflation for March worse than otherwise would have been the case. As raw materials purchases from Russia might be affected downward, that will cause inflation to be higher than before the war. It will encourage the Federal Reserve Board to keep increasing rates for the rest of the year as well.”
Higher interest rates discourage home and auto purchases. And if those rates go high enough, they spark a recession. The Fed pushed up the Fed Funds rate from 1 percent in 2004 to 5 precent in 2007, bringing on the deep recession of the next several years. That Subprime Recession, as it’s sometimes called, tanked home prices in California by as much as 75 percent in some areas, although less along the coast.
Because of its high regulatory and tax costs – and its political its leadership’s absurd obsession with banishing fossil fuels – California is not ready for a commodities-led recession. Especially hard hit will be the poor and middle-class, who drive the long commutes in ancient, wheezing cars. And whose budgets for food already have been decimated by the price increases from the COVID supply disruptions.
The pain is going to be immense.
John Seiler blogs at johnseiler.substack.com
