Why gas costs more in California than Texas
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Why do gas prices differ between California and Texas?
Well, here's where we are. A check on the nuts and bolts of this economy. Oil and gas because the news. And bicycles in Los Angeles. From American Public Media, this is Marketplace.
In Los Angeles, I'm Kyle Rizdahl. It is Tuesday today, the 26th of May. Good as it always is to have you along, everybody. The big economic data of the week comes Thursday. The Personal Consumption Expenditures Price Index, courtesy of the Commerce Department. The Federal Reserve's preferred measure of inflation, as you know, unless and until Chair Walsh decides otherwise. The 12 regional Federal Reserve banks put out reports, too, you know, which today comes from the Chicago Fed with its National Activity Index. National activity, it seems, is mixed. Manufacturing looks not bad.
What factors contribute to higher gas prices in California?
Personal consumption, though, not great. Marketplace's Justin Ho gets us going with what the heck the Chicago Fed's National Activity Index is and how the heck to read it. The Chicago Fed's National Activity Index sums up a bunch of indicators covering different slices of the economy, including manufacturing activity, which picked up in April.
That's not surprising to us.
Nancy Vandenhouten is lead economist at Oxford Economics. She says there are a number of factors that are boosting manufacturing right now. One of them is last year's big tax and spending law.
Another big factor is the AI build-out, which has created demand for lots of inputs such as computers and electronics.
Manufacturing is also being propped up by businesses boosting their inventory levels. Van den Houten says a lot of businesses' inventories are too low right now.
If inventories get too low, you're going to see some increases in manufacturing output to restore inventories on the part of businesses.
On the negative side of the ledger, the Chicago Fed index also found that consumer spending has been slowing down. Menzi Chen is an economics professor at the University of Wisconsin. He says consumer spending had been boosted by last year's tax cuts, but then consumers got slapped by the side effects of the Mideast War.
So higher gasoline prices for sure, sort of the uncertainty associated with the war. What that's done is that it's offset what we would have gotten from the tax cuts.
How do California's regulations affect fuel costs?
The Chicago Fed index also found that employment slowed in April. Peter Orozum at the University of Iowa says that's not necessarily a bad sign yet, considering that the labor market overall is in pretty good shape. Put another way? There's plenty of consumer demand to justify the number of jobs that are currently in the U.S. economy. But that also means the health of the labor market depends on consumer demand. So signals that the consumer demand might be weakening is a little bit concerning. Especially since consumer demand has been keeping the U.S. economy strong over the last couple of years. I'm Justin Ho for Marketplace. Wall Street on this Tuesday that feels like a Monday. Stop me if you've heard this one before.
Tech stocks, baby. We'll have the details when we do the numbers.
Thank you.
What is the impact of refinery shutdowns on gas prices?
I'll tell you what, for all else that ails this economy, and it is not a short list, as you know, this is a good time to be a wholesale club. BJ's reported last week that quarterly revenue was up nearly 10% from a year ago. Sam's Club beat expectations, helped by strong gas sales. This week, Thursday, we'll get the biggest of them all, Costco. It of the more than 80 million paid memberships worldwide, a number that keeps on growing. Thanks in part, as Daniel Ackerman is about to explain, to the higher income customers who are still driving so very much of consumer spending right now. Michael Baker is a retail analyst with D.A. Davidson and a member of both Costco and BJ's. I do try to spread it out a little bit and go to both, both for personal and professional reasons.
Though if he finds himself heading out to shop while hungry... Huge fan of the $1.50 hot dog at Costco, so that's a draw for lunch every so often. Baker says the wholesale clubs, especially Costco, have long appealed to higher income consumers.
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Chapters
8 chapters
1
Why do gas prices differ between California and Texas?
0:02–1:05
2
What factors contribute to higher gas prices in California?
1:05–2:34
3
How do California's regulations affect fuel costs?
2:34–3:46
4
What is the impact of refinery shutdowns on gas prices?
3:46–5:09
5
How does the local economy influence gas prices in Texas?
5:09–6:39
6
What role do imports play in California's fuel pricing?
6:39–7:37
7
How is electric vehicle adoption changing fuel consumption patterns?
7:37–8:52
8
What are the future implications for gas prices in California and Texas?
8:52–26:43