Category Archives: Business and Economy

This Year the VRS “Diet COLA” Will Really Hurt

by Steve Haner

The most recent year-over-year inflation measure approached 9%, with many key food or energy items growing in cost even faster. The official inflation estimate just used to increase the state’s gasoline taxes as of July 1 was 7%. So what inflation factor will be used to adjust state and local employee pensions this summer? Those will go up less than 4%.  Continue reading

Dropping? Nope, Gas Tax Now Rises July 1

by Steve Haner

Virginia’s gasoline and diesel taxes will rise 7% on July 1, about three more cents per gallon when all the elements of the tax are combined.  This is the inflation-driven cost of living adjustment which Governor Glenn Youngkin (R) and most legislative Republicans tried to short circuit, but which was preserved by a vote in the Virginia Senate last week.

The new gasoline tax will be 28 cents retail, 8.2 cents wholesale plus another 0.6 cents per gallon to fund a program for removing old underground tanks safely.  That’s a combined tax of 36.8 cents per gallon. The taxes on diesel will be 28.9 cents retail, 8.3 cents wholesale plus the same tank fee, a total of 37.8 cents per gallon.  Continue reading

America’s Petroleum Refining Capacity in the News – What is Going On?

By James C. Sherlock

This is a note about perhaps the highest profile national inflation issue, the price of gasoline and diesel.

The President is demanding more supply from U.S. refineries.  Headlines like this one blare at us today:

Biden threatens oil companies with ’emergency powers’ if they don’t boost supply amid inflation spike.

The letter behind such headlines, which is exactly what it seems to be, was sent to the largest refiners in the country.  Among other things, the President wrote:

My administration is prepared to use all reasonable and appropriate Federal Government tools and emergency authorities to increase refinery capacity and output in the near term, and to ensure that every region of this country is appropriately supplied.

I looked up the data on oil refining that Mr. Biden’s Energy Information Administration has published.

From the numbers on American refinery input and capacity, Mr. Biden will need more than “emergency powers” to increase refining output.

He will need a a genie.

Continue reading

A History Lesson for the Governor

by Dick Hall-Sizemore

In announcing the latest revenue collections (they are high), Governor Youngkin renewed his pitch for tax cuts, commenting, “This report confirms that the time is now to deliver meaningful tax cuts to Virginia families who are getting crushed by five-dollar gas and record-high inflation.”

That statement gave me pause.  “Record-high inflation”?  I am old enough to easily remember the late 1970’s and early 1980’s when mortgage rates were in the mid-teens and, I seem to remember, inflation was high as well.  (I realize that Mr. Youngkin was only 14 years old in 1980, so he probably was not paying attention to such things.)

A little research confirmed my memory.  According to the U.S. Bureau of Labor Statistics (BLS), inflation peaked in March 1980, with the CPI 14.8 percent higher than it had been 12 months earlier.  Inflation was 11.35 percent for calendar year 1979 and 13.5 percent for calendar 1980.

The BLS data provides additional historical perspective.  During the period of July 1916-November 1918, the inflation factor was 19.1 percent on an annualized basis.  From November 1918-June 1920, it “dropped” to 17.3 percent.  For the 12-month period of March 1946-March 1947, overall prices increased 20.1 percent.  For the 24-month period of Dec. 1972-Dec. 1974, the annualized inflation rate was 10.5 percent.  There was the period in the late 1970’s and early ‘80s already mentioned.  Even as recently as Oct. 1989-Nov. 1990, the inflation rate was 6.3 percent over each 12-month period, not that much lower than today’s current rate.

Today’s price increases are causing hardship for many people.  However, that is no reason for politicians to exaggerate them for their own purposes.

Oink! Another Supply Chain Disruption

A cruel dilemma: pigs’ rights versus cost of living, pigs’ rights versus cost of living. How can mere mortal man choose?

by James A. Bacon

Virginia-based Smithfield Foods has announced its intention to close its Vernon, Calif., meat-packing plant, which employs 1,800 people and pays $21 per hour on average. The company cited “high costs and over-regulation” for the decision. The costs of doing business in California “are significantly higher than other states where we operate,” said Jim Monroe, Smithfield vice president for corporate affairs.

According to The Wall Street Journal, the cost of utilities is 3.5 times higher per head to produce pork compared to the 45 other U.S. states where Smithfield operates. Smithfield also cited California law that requires farmers to give hens, sows, and veal calves more living space. Meanwhile, pig farmers are cutting back as the cost of feed, farm labor and material increases.

The Smithfield news follows close on the heels of the announcement that inflation reached 8.6% over the past 12 months. The Smithfield decision won’t help matters. Shrinking meat-packing capacity will add to upward pressure on bacon, pork and sausage prices and, thus, the overall price of groceries. Continue reading

Fuel Costs Explode on Dominion Bills in July

by Steve Haner

Are you enjoying paying more for gasoline? Have you noticed how that works its way through and inflates the price of just about everything else you buy? The other shoe drops in July when Dominion Energy Virginia increases its prices to reflect the rising cost of fuel. It will also spread more inflation virus throughout the economy.

The cost of fuel and purchased electricity is a separate charge, designated Rider A, on every monthly electric bill, residential and commercial. The annual fluctuations are usually small, and can go either way, but the increase this time will hit everybody hard and may hold for years. (Here is the case file.) Continue reading

Why Not Virginia for Semiconductor Manufacturing Expansion?

Virginia Engineering Programs

by James C. Sherlock

Among the things that the Russian invasion of Ukraine has made clear is the vulnerability of Taiwan and with it, the access of the U.S. economy to the 90% of advanced computer chips manufactured there.

The national security requirement for domestic chip manufacturing brings opportunity. It is the nation’s most urgent manufacturing priority. So, why not build the needed plants in Virginia? Is the Commonwealth organized to attract those investments?

For the answer to the last question I looked at the Virginia Department of Commerce and Industry, the State Council on Higher Education in Virginia (SCHEV) and Virginia’s engineering schools and found nothing to suggest Virginia is making an organized effort.

Much of Virginia’s headline effort in engineering education is to expand opportunities for Amazon workers in Northern Virginia.

I suggest Virginia focus its Department of Commerce and Trade on chip manufacturing, create dedicated educational consortiums, identify available facilities and workforces like those of the shuttered Rolls Royce plant in Prince George County and offer tax abatement packages to actively recruit semiconductor manufacture. Continue reading

Planning for Telecommuting’s Effects on Virginia

By James C. Sherlock

I think that we don’t yet realize the full impact of the revolution being wrought by the telecommuting that accelerated during COVID.

Virginia Railway Express Route Map

I am sure I don’t.  But Virginians, and our state and local governments, must try to figure it out.

We are moving towards a world in which white collar workers will be increasingly exempt from commutes.

We have already seen during COVID the leading edge of the migration of workers and their families away from many of America’s cities, especially those with increasing crime, closed businesses and otherwise lowered quality of life.

Look at New York City.  I visited it a couple of months ago.  Many places I used to enjoy have become an urban wasteland.  D.C. is not far behind.

Virginia urban areas and some of our suburbs have experienced COVID-related business failures and are threatened with more that result from the lifestyle changes that COVID brought.

The attractions in these places are not directly related to employment, but rather to population density. Restaurants, night life and the arts were exposed by COVID as vulnerable.  Some people got out of the habit of centering their social lives on them.

The costs of cities and suburbs, especially housing, are less and less affordable.  Prices have continued to increase in the face of fast-rising mortgage rates (Note 1).  This cannot continue, so it will not.

Other Virginia locations that offer attractive lifestyles, lower costs of living and the communications infrastructure to support telecommuting with bandwidth and speed at scale can expect to see in-migration and its economic benefits if they both prepare for and solicit them.

The knock-on effects may prove far-reaching.  I will offer a few of them for consideration.  Virginia state and local governments will either plan to accommodate them or be run over by effects which, planned for or not, they cannot control.

Continue reading

Bylined Utility Puffery in Richmond Times-Dominion

by Steve Haner

I guess what shows up in the driveway every morning is now called the Richmond Times-Dominion.

On yesterday’s front page, and today picked up and spread across the state by the Virginia Public Access Project, was a long, puffy public relations piece about Dominion’s proposed Coastal Virginia Offshore Wind project. It was written by the paper’s climate-alarmism correspondent Sean Sublette. It was a byline on a company news release, not something real newspapers do.

What the casual observer will miss is that it also represents a trend. The same writer, who came to the paper from a climate alarmism non-profit, about a week earlier wrote a similarly one-sided report based on Dominion’s claims of coming success in its rollout of utility-scale battery projects. Back on April 1, he quoted the company’s own cheery take on a recent State Corporation Commission approval of various solar and storage projects.

All three articles quoted only company spokesmen and provided only the company spin.  Readers who stopped there would know nothing about any disputes during the SCC proceedings, long-term costs to consumers, or any of the widespread doubts about the reliability of the underlying technology. Continue reading

Building Systems to Use Methane Not From Wells

Methane escaping from a well being burned off.

by Steve Haner

Methane (CH4) is money. It is also known as natural gas, one of the most efficient fossil fuels we use, and allowing it to leak into the atmosphere when it could be used wastes energy and money.

Methane is also a greenhouse gas (GHG). But the story gets more interesting here, because when CH4 leaks into the atmosphere it mixes with oxygen and begins to break down into carbon dioxide (CO2) and water vapor (H2O), also both greenhouse gases. Burn it in your home furnace and the same byproducts result, carbon dioxide and water (and valuable heat, of course).

Methane is better at absorbing radiation and thus a more potent GHG than CO2, but it also breaks down far faster than the CO2 it eventually becomes. It all becomes CO2, whether captured and burned or released. So it is debatable whether there are huge environmental benefits behind 2022 legislation to encourage Virginia’s gas utilities to capture and sell methane from sources other than traditional gas wells. Continue reading

Virginia Slides Lower in ALEC Economic Rankings

American Legislative Exchange Council rated Virginia 30th out of 50 states using these three measures of economic performance over ten years. Click for larger view.

by Steve Haner

First published earlier today by the Thomas Jefferson Institute for Public Policy.

As measured by the American Legislative Exchange Council (ALEC), Virginia’s economic outlook has continued its precipitous drop and now barely ranks in the top half among the American states, 24th out of 50. A decade ago it was in the top five, ranking third in 2011 and 2012 and fifth in 2013.

Using three direct measures of actual economic performance, gross domestic product and job growth and population out migration, ALEC placed Virginia 30th among the 50 states over the past decade. Neighboring North Carolina, on the other hand, ranked 12th in recent economic performance and second in economic outlook.

Virginia’s number 24 ranking in the annual “Rich States, Poor States” outlook comparison will be dismissed by some as less important than other indicators of competitiveness, including the ultimate bragging point of being number one in the last CNBC ranking of best states for business. But the downward trend is dramatic, Virginia having ranked 17th last year and dropping seven places in this survey. Continue reading

SCC Asked for Hearing on Secret Renewables Costs

by Steve Haner

Appalachian Power Company has asked the State Corporation Commission to schedule a separate hearing on Attorney General Jason Miyares’ motion to break the seal on exhibits in its application for new renewable energy sources.

Miyares’ April 6 motion was first reported by Bacon’s Rebellion, in a story on Appalachian’s pending application for approval of the projects and of its overall plan for complying with the Virginia Clean Economy Act (VCEA). Appalachian’s response motion was filed April 13, claiming irreparable harm to its stockholders if the actual line-by-line project cost projections were revealed to its customers.

Although some of these discrete items may appear innocuous on their own, collectively they would enable a savvy party to discern the price paid for the facility, which is competitively sensitive.

What do they say in swanky restaurants? If you have to ask the price, you cannot afford it. Revelations could be politically sensitive, as well, given the partisan divide on the VCEA itself. Continue reading

Virginia’s COVID Performance Rates a D

Source: The Committee to Unleash Prosperity

by James A. Bacon

Virginia performed worse than 35 other states during the COVID-19 recession, based on an analysis that encompasses mortality rates, economic performance and educational performance. The Commonwealth fared better than average in health outcomes, worse than average in economic performance, and near the bottom in school closures. The overall ranking: D.

Nationally, there was little correlation, however, between the stringency of economic and school-related COVID lockdowns and health outcomes, finds the study, “A Final Report Card on the States’ Response to COVID-19,” published by the National Bureau of Economic Research. The authors were Phil Kerpen, Stephen Moore, and Casey B. Mulligan, all well-known free-market economists.

Former Governor Ralph Northam, a physician, can take some comfort in the fact that Virginia under his watch performed better than most other states in the COVID-related mortality rate when adjustments were made for age and the prevalence of obesity and diabetes risk factors in the population — 10th best in the nation.

However, when the perspective shifts to “all cause excess deaths,” which captures the mortality effects of lockdown policies such as higher drug and alcohol deaths, suicides, and foregone medical treatments, Virginia’s national ranking falls to 19th. Continue reading

SCC Staff: Dominion May Exceed Wind Cost Cap

A schematic from the application for the proposed 14.7 megawatt turbines for the CVOW, with measurements. Click for larger view.

by Steve Haner

A similar article was published this morning by the Thomas Jefferson Institute for Public Policy.

Testimony filed by the State Corporation Commission staff on April 8 opened a slight possibility that the Commission could reject Dominion Energy Virginia’s proposed $10 billion Coastal Virginia Offshore Wind project off Virginia Beach. It all depends on how the SCC decides to calculate the CVOW’s levelized cost of energy (LCOE), the dollar cost of every megawatt hour of electricity it produces plus the transmission costs.

When the 2020 General Assembly adopted the Virginia Clean Economy Act and related legislation, it set a cap on that key LCOE measure, which is used to compare the costs of various methods of making electricity.

If the utility failed to stay under the LCOE cap, the SCC would have the authority to reject the proposal as imprudent and unreasonable. If the project remains below the cap, legislators mandated approval by the SCC, despite any other doubts about its prudence and without considering less expensive alternatives.

The cap set was $125 per megawatt hour, after deducting the value of the very large tax credits granted for wind projects under federal law. In the application it filed late last year to build the facility, Dominion estimated the LCOE (after the tax credits) at about $83 per megawatt hour. But Katya Kuleshova of the SCC’s Division of Public Utility Regulation challenged several of the assumptions in her testimony and noted that if the assumptions prove wrong, that number rises substantially. Continue reading

A Bag Of Oranges and Gas Tax Posturing

by Steve Haner

The bag of mandarin oranges that was $4.99 last week was $5.99 this morning. Fruit trees aren’t getting raises – that is the impact of fuel prices, the cost to ship them to Virginia.

As I’m fuming and pushing my cart to the next inflated item, the phone pings to announce an email. Could relief for gas prices be on the way? is the teaser headline from Virginia Mercury, with its lead story this morning a straight-faced discussion of the truly comedic proposal yesterday by House Democrats. They offer Virginia car owners a one-time $50 payment ($100 for a two-car family) in lieu of actually lowering the fuel taxes, as Governor Glenn Youngkin has proposed. Continue reading