What difference does it make to you if they have to pay almost $6/gallon for gas, if it’s even available at all?
On the surface not much. But not only is it an instructive situation that we can learn from, there are indirect impacts to all of us.
First, the instructive part of things.
Bottom line, California does stupid things with their gas regulations that more or less isolate them from supply outside of CA. As a direct result of supply and demand, this means that any disruption to the supply there impacts prices heavily.
Like right now. An accident at a refinery, while other refineries in CA are ramping down production of regular gas so they can switch to the special ‘Winter Blend’ that the State mandates, results in a major hit to supply.
Oh, and both of those are different formulations that the majority of the rest of the country uses, so you can’t just ship in a bunch of extra gas from Oregon or Nevada or something.
So what’s it like on the ground? From what I’ve heard, smaller gas stations are just plain out of gas. Suppliers are rationing gas to stations, which turn around and ration to customers.
But gas prices also impact prices for food and other goods. Trucks need diesel, which is also around $6/gallon in many parts of California. As the cost of diesel ramps up, that expense gets passed on to customers buying the things that those trucks are transporting.
You can see where that will take prices for just about everything, since just about everything gets where it’s going on an eighteen wheeler.
Now to the indirect impact to the rest of us who DON’T live in CA.
About 30% of shipping containers that come to the United States come through California. Those containers leave ports on trucks and trains, and get moved around those ports using heavy equipment.
Which run on gas and diesel.
Guess where the extra cost for that goes?
Oh yeah, to the rest of us, through the supply chain that feeds our consumption.
Not much we can do about that part, it is what it is. thankfully this is likely to be a shorter term problem for California, but it’s also likely to happen again and again.
And do I need to remind you what might happen if there’s a war in the Middle East?
So make sure you can weather those short term impacts. Store some gasoline, have extra ‘stuff’ on hand so you can play price games on short term bubbles like this.
Then think through what you’d do if gas prices went to $10/gallon and didn’t come back down…