Does that say $6? Why you're paying so much at the pump

S1: Hey , San Diego. It's Andrew Bracken in for Jade Hindman on today's show. Gas prices are up , but rents are coming down. So what does it all mean for San Diego's economy ? This is KPBS Midday Edition. Connecting our communities through conversation. Welcome back to KPBS Midday Edition. I'm Andrew Bracken in for Jade Hindman. Gas prices nationally rose above $4 this week. Here in California , our average gas price is much higher. Closing in on more like $6 a gallon at this point. Here to talk more about that other economic trends is Daniel and Mark. He's chief economist at the Policy and Innovation Center. Daniel , welcome back to midday.

S2: Thanks for having me , Andrew.

S1: Thanks for doing it with me this time. Normally you're talking to Jade. Today you're stuck with me. So I mentioned in the intro there This this difference pretty stark difference between the national average of gas price and what we see here in California.

S2: So , um , for one , uh , our taxes are about 40 , $0.40 , uh , more expensive than the average across the US per gallon , right ? So $0.40 of that additional charge , that's just our additional taxes. Our environmental compliance , uh , probably costs another $0.50 or so , uh , per gallon. We just have more stringent standards and and , you know , and then and then finally , we actually take a we require in California something called kabob , which is like a lower emissions blend of fuel , and it's more expensive for refineries to make. And it also means that there's fewer refineries. We make it , which means that there's , um , less competition to give us lower prices , right ? So all of those things kind of conspire to , um , increase the cost for us. Um , and oh , and then one other thing is we have fewer gas stations. Um , so one of the things about gas stations is if you're right next to another gas station , you got to charge less to compete with your neighbor. There are 20 gas stations per 100,000 people in California. There's like 33 in the rest of the country. So , uh , fewer gas stations , higher standards , uh , more environmental compliance , taxes. There's a lot of things that contribute to our higher prices.

S1: Um , you know , the kind of one big part of this piece we're talking about with gas prices is obviously the war in Iran and the impact it's having. You know , can you talk a little bit about why that's driving up prices here in the U.S. so much ? Yeah.

S2: And and you've heard me say this before. But to me , anytime we talk about the economic cost of war , I just want to remind people that the biggest economic cost of war is , uh , life , lost life. And , you know , there is nothing more valuable in an economy than a human life. And so that is the number one cost of this war. But another economic cost of this war is , um , this massive increase in fuel costs. So gas is up 36% , diesel is up over 40%. That's important because our trucks use diesel and they are what deliver goods to markets. So that means prices are up. Um , but the the situation there is you know , we don't actually get uh , much oil from the Persian Gulf countries. Right. And that's , that's that's where the choke point is , the Strait of Hormuz , which is basically controlled by Iran. They they are not letting ships through that , that strait. And that means that 20% of oil production is kind of not available to the global market. Now , the US is the largest producer of oil in the world. So you might think , well , we've got enough. Why don't we just buy our own ? And that's fine. Well , it's a global market , so if there's less production around the world , that means that , um , prices go up around the world , right ? And because it's a single global market that that affects us at the pump too.

S1: Is , you know , what's happening in the Middle East.

S2: Um , and you know , again , this is uh , this is not a flash in the pan thing. This is not something that we expect to go back down the moment. I mean , we've heard that the president is going to give an address later tonight. Um , spoken very optimistically about the end of war. But , you know , even if the US were unilaterally to withdraw from this war right now and even imagine that the Iran cooperated and opened the strait tomorrow , we wouldn't see gas prices go back down to where they were before the Iraq War. Partly that's because you expect insurance costs to have increased for shipping. There's going to be , you know , manufacturers simply don't believe that it's safe to put other ships through the strait. And then , of course , there's been a lot of bombing of refineries and oil fields and things like that. And that takes time to rebuild. And we really don't know how long it will take to rebuild capacity. And that means we don't know how long it will take for oil prices to go back down to where they were before this war.

S1: So a lot of just intersecting factors here.

S2: And of course , we already have an affordability crisis here in San Diego. But mortgage rates went from about 6.1% to six and three quarters , um , since the beginning of the war , that that would be like a $325 a month in terms of increased mortgage costs for a typical mortgage in San Diego , and that's over $100,000 over the course of a loan. Right. It's like this is not a minimal cost. It's an appreciable impact on affordability in the region. Um , so , you know , all of that. And then , of course , you know , as I mentioned , increased gas prices just doesn't just mean gas prices at the pump. It also means that shipping is more expensive. And that means that , um , the goods that you buy that are shipped , uh , are more expensive. And it also means , you know , oil as a component of fertilizer. And that means that food is more expensive. Right. So like these effects are really profound and far ranging on housing.

S1: Um , you know , there was some data that came out. San Diego rents have actually declined a bit. Um , you know , since this time last year and I'm , you know , kind of follows , we've seen some increase in housing stock. We've seen some easing of housing rules to kind of spur that production. that I think we've , you know , we've heard from you on this program talking about how. How you know , how much we need that how is that influencing the overall housing market here ? You know , this news about the rents declining.

S2: I mean , um , well , it's great news for the for the many , many people who are renting. Um , uh , this is a story that's all about supply and demand. And price is where supply meets demand. That's kind of econ 101. And , um , in this case , supply is the construction of new multifamily units. And nationwide we've seen some decreases , you know , 1 to 2% in , in rent prices. But it's actually been a higher decrease here in San Diego , not as high as places that are really crushing it in terms of production of new units like Austin has seen an 18% fall in rents from their peak. Um , but we are doing pretty well. And Freddie Mac says that. 24 , 2024 2025. Had the highest level of new multifamily supply across the country since the 1980s. So this is really a story about supply increasing. And what that means is that vacancy goes up. It means that the time to fill an apartment goes up because people have more options. And that means that landlords are saying , okay , you know , we're going to lower prices to attract those renters. And that's great , great , great for renters.

S1: The transition away , you mentioned this kind of multifamily housing kind of moving away from that traditional single family house , right ? Yeah. That kind of we can't fit enough , right ? Yeah.

S2: We don't have a lot of greenfield development here in San Diego. It's not like we've got a big old , you know , area that's unpopulated that we could just build a bunch of houses in.

S1: So I mean , on that , that's one piece there. But what what else sets San Diego apart from other housing markets , say , Austin or , you know , you mentioned Austin. Yeah.

S2: Yeah. I mean , one thing is Austin has done an incredible job of making it easier to build. And I know there are a lot of folks in local government here who have taken really , um , conscientious efforts to to make that happen , too. And that's one of the reasons that we're outpacing the rest of the country in terms of decreased rents. But there's more we could do. And , um , you know , I think it we've traditionally had a very difficult time building , partly because of Sequoia. So we've got these environmental regulations that can stand in the way of of producing new housing. Um , you know , there's a lot of reasons why we've under produced in this region , but it's heartening to see in production increasing and , and , you know , the efforts at local government , there are a lot of , um , public servants in our local governments who are really committed to trying to increase production of housing. And and I admire their efforts. I think , you know , Heidi Von Bloom at the city has done such incredible work. Um , and , you know , the county has streamlined their , um , their , um , kind of , uh , permit approval process and all that stuff. So , you know , there's just a lot of good work going into this.

S1: I'm going to talk now about San Diego's population. You know , in the last few years we've seen an increase , right ? But it sounds like the last year it's kind of we're seeing a change and a lot of that's due to less immigration. Yeah. Um , talk to us about , you know , these population trends we're seeing in San Diego and how that impacts our economy. Yeah.

S2: Yeah. Um , you know , the most recent sandag projections of population project us to be growing through 2040 and potentially a population decline after that. But , you know , I know a lot of people who do these projections and they're really brilliant people. And they'll tell you , you know , it's not easy , but it's pretty straightforward to figure out how to predict births and deaths , you know. But the component of our population growth that is so difficult to predict is the impact of federal , state and local policy and how that shapes people's ability and desire to come to San Diego. In the case of of this last year , you know , just the large scale immigration crackdown and what I would call an indiscriminate immigration crackdown has made this a much less appealing and accessible place for new Americans. And that's a real problem , because new Americans have been a source of our growth , um , for a long time now here in San Diego. We see in countries that have this kind of inverted demographic pyramid like Japan , an extended economic malaise , a really , really hard hitting , um , uh , a decrease in economic growth. And that's where we're headed. If we can't get back on track , we it's really important population growth to the economy , because the size of the economy is really just the number of workers times the productivity of those workers. So when productivity goes down , that's bad. But when the number of people goes down , that's really bad. Um , it just means that our economy is going to shrink , and we don't want that. We don't want to become Santa Barbara. We don't want to. I mean , all of Santa Barbara. But like , it's a great place to live if you couldn't afford it , but you can't afford it. Yeah. We don't want to become that. We don't want to become a small , shrinking economy. So immigration is part of our lifeblood , and it's a quarter of our neighbors are are foreign born , and they are hardworking people who even conservative think tanks like the Cato Institute say , make a net contribution to our tax base and to our economy.

S1: We have about a minute left. And I do want to you know , you're talking about jobs.

S2: And and the federal government is behind still because of that extended government shutdown that we experienced at the end of last year. Uh , that's not the current partial government shutdown. The last one seems to be we're going from shut down to shutdown these days. But , uh , yeah , the BLS is still recovering there. And so we most recent numbers are from January. The numbers are pretty soft. Um , uh , I think I'm concerned about , um , uh , unemployment rates going up , I think for people who are looking for work at , you know , just their , their anecdotal experiences that it's really hard out there. And so my heart goes out to people who are looking for work and having a hard time finding it. And I think if you're in a job that you can make do in , um , you know , don't leave that job unless you've already got something else lined up because it's first in first out. And this is a this is a rough market right now.

S1: Well appreciate the all your um advice there and just information. Hopefully you'll get more data so we can have you on again to talk more about it. I've been speaking with Daniel , Daniel and Mark. He's the chief economist at the Policy and Innovation Center. Daniel , thanks.

S2: Thanks , Andrew.

S3: That's our show for today. I'm your host , Jade Hindman. Thanks for tuning in to Midday Edition. Be sure to have a great day on purpose , everyone.