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Below are the monthly updates from the most current September 2021 fuel price data (GasBuddy.com) and July 2021 electricity and natural gas price data (US Energy Information Administration). To view additional data and analysis related to the California economy visit our website at www.centerforjobs.org/ca.
The sustained escalation in both energy prices and average monthly costs reinforces a reminder that rising costs of living and rising costs of doing business in California currently remain a part of the state’s economic future. These increasingly unaffordable cost additions are not the result of the state’s climate change program; they are the outcome of the way the state has chosen to pursue it. While the nation’s greenhouse emission reductions have largely matched those in California, and in some years dropped at a greater rate, the national reductions have been achieved at far lower costs, especially to lower and middle income households.
The data presented below as usual provides comparative energy cost information with a one to three month lag, and consequently does not yet incorporate recent activity likely leading to even higher costs:
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Oil and natural gas prices rose sharply after OPEC rejected President Biden’s request to increase production to offset drops in US production and exports. Through October 5, crude oil futures rose 63% since the beginning of the year to just below $80 a barrel. Natural gas futures rose 156%. These price rises will flow through the data tracked in these reports over the coming months as consumers and employers use energy directly especially for heating in
the upcoming winter months.
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These higher costs will also move into the price of thousands of products that rely on these supplies as a feedstock or input at some point in the production and distribution chain. The current production restrictions are occurring just as demand is increasing due to the normal period of stockpiling in anticipation of winter demands and as overall demand is increasing in line with global economic recovery. At a minimum, these supply and cost pressures will fuel the rising inflation experienced in recent months. At worst, they will present yet another but far more substantial supply disruption affecting the future path of the recovery.
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This latter effect is already being seen elsewhere. In Europe, coal and natural gas shortages combined with drops in renewables output have produced power shortages, spiking energy prices, shifts to oil and more expensive LNG imports, and the threat of power company bankruptcies. In China, climate change program limitations on coal production and energy efficiency goals again combined with drops in renewables output have also produced widespread power
shortages, leading to a renewed wave of production shutdowns that are contributing to the supply chain blockages already affecting production and product availability in the US. Faced with these shortages, US companies have been forced to shut down their own production, actions that will limit potential recovery job and income gains in the coming months, and in other instances allocated limited component supplies to higher price and higher margin products in order to survive economically in this period, actions that will contribute further to rising inflation.
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The shortages in China are also affecting future costs for renewables in the state and the US as well. While California has generated some "clean energy" jobs under its climate policies, the bulk has been temporary jobs related to construction and installation activities. Manufacturing and production jobs related to materials and equipment instead are located elsewhere, with China containing about 70% of global solar panel capacity. Rising material and shipping costs are affecting the economics of an increasing number of wind projects. Production shut-downs in China are creating shortfalls in many critical components required to maintain solar panel supplies.
The economic consequences of the current energy supply disruptions are a reminder that a range of energy sources remain a part of our present and likely will be essential at least for our foreseeable future as well. Our monthly tracking will continue to report the costs to California’s households and businesses as the state’s approach to the issues continues to unfold.
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