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Below are the monthly updates from the most current November 2021 fuel price data (GasBuddy.com) and September 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 most recent data reflects continuing rises in energy costs from California’s regulatory policies, but also incorporates more national and global effects as limits on oil and gas production met growing demand from economies that were recovering prior to the latest Omicron threats. Tighter energy supplies reflect COVID-related factors affecting production company activities in the US, along with actions on both the state and federal levels to reduce overall domestic oil and gas production and supplies. While the president previously urged OPEC to step up production to backfill domestic shortfalls as prices began to rise, that group and allied countries instead committed only to modest increases that likely will maintain prices near their current levels.
Energy price spikes in the past have often led to recessions. Households have less flexibility to adjust energy consumption in the face of sharply rising prices, with the subsequent shift in spending crowding out other discretionary purchases even as the prices on those purchases also rise due to higher energy cost effects on businesses as well. The recent surge in energy prices nationally and globally consequently raises concerns over potential consequences to still-recovering economies, although the duration of the price spikes has yet to be seen.
The situation in California is different. The recent price spikes add on to cost increases that already have occurred over a long period due to the state’s regulatory policies. Households have not had to contend with price increases over the past month as in the rest of the states, but also with sustained rises over the past few years. The full effects have been masked by the performance of the overall economy which is dominated by growth in the high tech industries. Wages within this part of the economy make the cost of living in the state more affordable for these households, while the energy intensive components such as servers and associated manufacturing have been moved to other states and nations in order to shelter company profits and growth from California costs.
For lower and increasingly middle income households, rising energy costs have a far greater effect on discretionary incomes if not the ability to maintain current standards of living. As illustrated in the Center’s Affordability Index, the results instead are not a transitory spike now being seen elsewhere, but a sustained effect grinding away at household incomes even as they have risen in past years.
The data this month also incorporates updates from Energy Information Administration with the final electricity prices and consumption for 2020. This revised data again confirms the growing “tax” imposed on household energy consumption coming from the state regulatory policies. In seeking to promote the state’s regulation-heavy approach to climate change, some commenters still attempt to dismiss the state’s soaring electricity rates by maintaining that overall, California still has some of the lowest monthly utility bills in the country.
This claim, however, relies on outdated data. In 2010 when the state’s first actions under AB 32 began implementation, California in fact had one of the lowest average monthly electricity bills in the country—the 43rd highest, or to put it other terms the 9th lowest among the states and DC. In the final 2020 revised data, California instead comes out 22nd highest and in the most current results (12-month running average) has already risen to 19th. Natural gas rates for households soared from 37th highest in 2010 to 9th highest in the latest results. Average gasoline prices in November were the highest in the nation, not only for that month but for the entire period that tracking is available.
In 2010 in the same year that California began implementing its current regulation-heavy approach to climate change, Congress failed to enact similar provisions on the federal level. The Waxman-Markey Bill incorporated many of the measures already underway or being developed through California’s program, but this legislation only narrowly passed the House and was never brought up for a vote in the Senate.
The failure to adopt California’s approach on the national level, however, had little effect on overall progress on reducing climate change emissions. From 2010 to 2019 during a period of economic expansion, California’s greenhouse gas (ghg) emissions dropped 6.6%. Nationally, emissions were down 6.2%. Combining the two sources, California contributed 7% of the national drop in emissions despite representing 14% of the national economy as measured by real GDP (2019). The core difference instead was the cost of achieving those reductions.
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