Monthly Archives: June 2015

Is Population to Blame for the Drought?

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The current drought has resurrected–and put a fine point on–the long simmering debate about the pluses and minuses of California’s population growth.  Is growth the problem in regards to water or do we just need better management?  This question could also be asked about another serious economic issue for California–housing supply and affordability.

According to Edwin Pattison, general manager of the Mountain House Community Services District, “When you increase a population significantly, you reach a point of what’s called ‘demand hardening,’ and you cannot conserve your way out of a situation where there’s just too many people and overcommitment of demand across the spectrum.”

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According to the California Department of Finance, by 2060 the state’s population will grow from  39 million people now to more than 51 million.

Californians for Population Stabilization want to blame the drought on immigration, “Virtually all of California’s population growth is from immigration. Let’s slow immigration and save some California for tomorrow.”  This reflects the public’s and economists’ mixed feelings about immigration’s effect on the economy, largely driven by the uncertainty-and subjectivity of-tallying up net gains/losses and the sorting out winners and losers.

“It’s totally the wrong question,” said Dowell Myers, a USC demography professor. “Without immigrants, California would be dead as a doornail. We don’t have enough children right now as it is to replace the workforce and the tax base … when Californians retire.”

Similarly, according to Heather Cooley of the Pacific Institute, the challenge is not the size of the population, but “how we develop, and the reality is we can be developing a lot better.”  Southern California water consumption has remained flat for 15 years, despite population growth.

“The notion that there’s too many people here is frankly absurd,” asserts Richard Sybert (former director of Gov. Wilson’s office of planning and research}.  “It’s frankly not borne out by the numbers … You could halve the population here – say we have 20 million instead of 40 million – and there would still be a drought.”

Since agriculture accounts for 80% of California water use, the solution could be a small shift of water from farm to urban uses according to Gregory Weber of the California Urban Water Conservation Council.  “I think there’s plenty of room for California to grow,” Weber said. “How it should grow, how big it should grow, these are I think some of the major pressing questions that are facing the state today.”

So is the key better growth management, better water management, or both?

The California Water Blog describes How To Manage Drought with five key prescriptions for better water management:

  • Get inside consumers’ heads – shift from engineering solutions to understanding human behavior.
  • Increase role of water markets – increased use of water transfers “would introduce further flexibility in managing water resources.”
  • Tiered water pricing works – consumers respond to higher prices.
  • Keep closer tabs on crop water use – use better water-use tracking and estimation.
  • Monitor and manage our groundwater – excessive groundwater pumping in dry years must be replenished in wet years.

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California jobs report; more shopping, more venture cap, more job seekers

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Beacon Economics provides a good roundup of mixed but generally positive May employment news for California.  The state’s nonfarm job growth outpaced the nation by  “expanding by 3.0% over the past year compared to a more modest 2.2% growth rate in the U.S. overall.”

A mixed signal came from a surge of  nearly 72,000 additions to the labor force–a  positive “sign of worker’s increased optimism about their employment prospects”–which ticked up the state’s unemployment rate from 6.3 to 6.4 percent in May.

With “consumers are growing more comfortable spending income and making larger retail purchases” retail trade employment added 8,600 positions.

Professional and Business Services employment surged, with strong growth in Scientific, and Technical Services, driven by “venture capital money” more of which “has been raised in the state than at any time since 2000.”

Despite losses in the farm sector, “to date, the overall California economy has yet to suffer serious setbacks from the drought.”

Check out Beacon’s full report including charts and talbes

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Gas price conundrum

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Foon Rhee’s recent editorial about California’s premium gas prices points to a true conundrum. High  prices are bad for the wallet but good for the environment.

Cal Gas price gapIn May Californians paid the highest premium for gasoline compared to the rest of the nation since the turn of the century –$1.03– that may have cost Californians an additional $1 billion at the pump.   But that premium has had long-standing benefits for the environment: greater fuel and energy efficiency. Relative to its economic heft, California has long left a smaller environmental footprint than most other states.  This is the result of factors including dense population clusters (less long distance rural driving), a moderate climate (lower demand for winter heating fuels), fierce regulators, and HIGH PRICES.

Arguably, that last item, in concert  with the regulatory environment, is the most effective driver of energy efficiency .  It’s a constant motivation that steers most people to make every day decisions in the name of their pocketbooks, such as preferring shorter commutes and more fuel-efficient cars.  Given these efficiencies, the total aggregate financial hit to the state economy is not as big as it would be otherwise or in other states.

According to Gordon Schremp of the California Energy Commission, the “blame” for the current spike in the gas premium was laid on several factors according to Gordon Schremp of the California Energy Commission:

  • California is an isolated gasoline market.  Pipes ship gas out, not in.  This means that gas can’t be easily imported to compensate for unexpected shortages.  Imported gas accounts for only 3-5 percent of gas supply.
  • Higher taxes including the application of  the state’s cap-and-trade system
  • Higher production costs for the transition from winter to summer gasoline mixes.

The good news from these high prices is that Californians will continue see value in fuel efficiency which should pay substantial, but generally unappreciated, environmental benefits.  In this case, what’s bad for budget is good for the soul.

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