Even though people are fleeing California in mass numbers, it is still the largest state in the United States. It’s also a coastal state and has some of the most important ports. Those ports are backed up right now with goods from all over the world.
California’s government has made a lot of terrible policies that inflict pain and hardship on people across the United States. Manufacturers adhere to the California policy simply because the market is the largest there. One example of this is emission standards on gasoline and diesel powered vehicles.
However, during this bout with inflation, we are seeing how other California state policies are bringing pain and suffering to the entire nation. It’s worth noting that California is a one-party state. Democrat only. Republicans don’t have any say.
I received an email with some data and started digging to see if the email was correct and I found out some other interesting things.
California has banned all heavy diesel trucks. Over the road, 18 wheelers are Class 8 trucks. The bans start in just three years, 2024. However, they are easing into it. 3 percent of class 2b and class 3 trucks, 7 percent of class 4 through 8 trucks, and 3 percent of class 7 and 8 tractors have to be emissions free. Pickup trucks the class 2b-class 3 rule only kicks in during 2027. However, by 2045, all trucks have to be emissions free.
That means, every truck in the country will have to meet those standards.
Just some points of information on big class 8 trucks.
Did you know 18-wheeler freight trucks drive around 175 billion miles per year? 68% of all goods are delivered by semis which works out to about 60,000 pounds per person in the US.
When I looked up accounting data, the Financial Accounting Standards Board (FASB) says generally accepted accounting principles (GAAP) allow businesses to depreciate their trucks for 3 years, and consider that to be the average useful life of the truck. Trucks plus trailers can be depreciated for 5 years.
Most big freight operators trade in their trucks at around 500,000 miles. Most truckers average between 80,000-125,000 miles per year. Financially, over the road long haul trucks are pretty modern since fleets turnover so quickly.
CARB is the unelected politburo that oversees vehicle emissions in California. Since 2010, they have gotten ever more strict. In 2020, they finally put the hammer down and any diesel truck that doesn’t meet their strict standards is banned from California roads. As per usual, smaller trucking companies were hurt the most. As much as 20% of trucks with small fleets were idled by onerous CARB rules.
Trucking companies (in California and out-of-state) that met earlier diesel emissions mandates are going to be hit with a “double whammy,” Tuter and Rajkovacz warned. By 2023, all trucks must be outfitted with a 2010 engine, so vehicles that retrofitted under earlier guidelines will have to upgrade once again.
Tuter estimates about 200,000 trucks registered with the California DMV will become non-compliant in 2023 as a result of the engine mandate.
Again, all this reshuffling increases operator costs which they pass on down the line to you, the consumer.
Tesla has entered the semi-truck competition. That’s good news! Competition is good! However, their truck has been delayed until at least 2022. Right now, Tesla trucks have an expected driving range of 300-500 miles. Diesel trucks range is something like 1400 miles depending on what they are pulling, where they are pulling it, the weather, and how fuel-efficient their engine is. Switching to an all-electric fleet will increase cycle times for goods, slowing supply chains. That means that companies will need to warehouse more goods, increasing their costs which they will pass along to you. Again, another policy that artificially causes inflation! But, of course, it is for your own good because they know better than you.
Hence, absent Tesla and the other big truck manufacturers being able to come up with reliable alternative fuel technology to power big 18 wheelers in less than three years, America will feel the full brunt of California policy on which trucks can be on the road.
If you were a big trucking company, what is your incentive to replace existing vehicles knowing that you have to replace them sooner with a non-fossil fuel vehicle? It goes without saying that there is no support system across the United States to recharge fleets of electric 18 wheel trucks. Of course, big truck stop chains could easily put them in. But, why would they do it now when there is no demand and it’s not clear that the technology will be able to do what it says it is supposed to do?
Nationally, policies have an effect too. As per usual, big government policies help big companies and put small companies out of business. We saw this with Dodd-Frank when it benefitted big banks and crushed community banks.
From the linked article above:
Experts in the trucking industry expect President Biden’s term in office to have a swift and possibly immediate negative impact on many of the smaller and lesser-known American trucking companies and the truck drivers who have chosen to work as independent contractors. Biden is expected to sign a transportation law that ran into a stall in the Senate in 2019. The Moving Forward Act requires commercial motor vehicles to increase their insurance liability from the currently required $750,000 to more than $2 million.
If the law is rewritten, a revised version of the Moving Forward Act may hit the trucking industry even harder than they would have been hit the first time it was written, and could increase the minimum insurance requirement to as high as $4 million. The motivation behind passing this law and such an increase might be found in the long standing relationship that exists between Democrat politicians and trial lawyers, allowing lawyers to sue drivers and their companies for an even larger pay day in the courtroom.
Then, of course, there are labor laws. You wouldn’t necessarily make the connection between labor, emissions, and why your groceries are more expensive or just not even on the shelf, but there is a direct connection.
California is not a “right to work” state. It’s easier to hire people in right to work states because the market for labor is more competitive.
Unions want to put the independent contractors in California out of business and Democratic legislators enable them. Most of California’s ports are serviced by independent non-union contractors. Of course, the dockworkers are all union workers. The unions have engaged in token strikes at the ports, but more may be coming.
There was an effort to ban non-union workers by the California legislature called AB5, but fortunately, Uber/Lyft and the gig economy lobbied successfully against it. However, no one knows determination like a committed hard leftist’s logic be damned. AB5 will be back.
I am a huge believer in federalism. States ought to be independent of federal government overreach. States also ought to be able to fight back. I am not sure how to deal with the problem of the committed leftists of California wagging the entire dog of the United States, but being aware of it at least will help you understand why things are the way they are.
It’s certainly a pain to ship goods from Asia through the Panama Canal into the Gulf States to be distributed throughout the US. Ports ring the Gulf of Mexico. But, maybe for companies, the extra cost of shipping via Panama is cheaper than floating your boat outside a California port in a Biden Boat Parade.
It goes without saying it might be cheaper to produce those goods in the US, Mexico, or other Latin American countries but of course there are policies and politics to deal with there too along with the amount of time it would take to build capacity to get supply chains healthy.
Thanks for putting this together. It's amazing how eager government and other leaders are to impose simplistic solutions on complex systems, whether it's the economy, the climate or other system. We can't seem to be able to handle complex systems.
"It goes without saying that there is no support system across the United States to recharge fleets of electric 18 wheel trucks. Of course, big truck stop chains could easily put them in."
And where would the electricity come from ?
As far as the Panama Canal goes, there is a fixed number of ships that can move daily through the canal I believe. Bigger ships can now move through the canal with the new locks, but that still doesn't account for the fact that the Culebra Cut is a choke point.