Explaining Southern California's economy

Say goodbye to Arco in Southern California

Mercer 20324

David McNew/Getty Images

An Arco gas station in Pasadena. It won't be around for much longer.

This just in — really! BP has informed operators of its Arco stations in Southern California that it won't be renewing leases with Thrifty Oil, which owns the current Arco sites, according to the OC Register. Arco has been in SoCal for 46 years and currently occupies 257 locations, so this is no small deal. USA Gasoline will take their place.

USA Gasoline is owned by Tesoro, which is more of a refiner that sells its gas at its own locations, along the lines of Valero. BP of course is a vast multinational energy company whose core business is oil extraction.

There's another wrinkle to the story, in this period of steep gas prices in our region. From the OC Register:

The move by BP has set off a firestorm of protest among the 106 Arco franchisees, many of whom own multiple stations and stand to lose their entire investment. About 2,000 Arco workers also will lose their jobs

It also raises questions about what will happen to gasoline prices when Arco, known as the low-price leader, is no longer in the market.

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Visual Aid: The comical student loan default rates of for-profit California colleges

Holly Petraeus, wife of CIA Director and former U.S. Army Gen. David Petraeus, has intensified the debate about for-profit colleges, their astronomical student-load default rates, and accusations that they're looking to market hard to members of the military. NPR covered the issue this morning with her, and referenced an opinion piece she wrote on the subject for the New York Times.

I've been thinking a lot lately about for-profit educational models, given that the way forward for California's economy clearly lies with a better-educated workforce. But the state's public school system is under a lot of strain. Can private companies, operating charter schools, technical schools, and other types of institutions be a solution? If you look at the ability of many for-profit Southern California colleges to graduate people who can actually pay for their education, the answer is no.

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Why Southern California's housing crash could lead to an entrepreneurship boom

The Economist's Ryan Avent has a Kindle Single out, titled "The Gated City." Reuters ran a short except last week, which included this:

If you can believe it, Silicon Valley’s main metropolitan centers were losing residents to other parts of the country during the Dot Com boom…The reason...was housing costs. From 1997 to 2000, average earnings in the Silicon Valley area increased by nearly 40%. But from 1997 through the end of 2000, home prices in San Francisco nearly doubled, according to the Case-Shiller index of home prices. As fast as compensation was rising, it wasn’t keeping up with housing costs. And so even as the demand for skilled workers in Silicon Valley soared, residents trickled away to other locations. That made for a too-tight labor market, and that, in turn, squeezed out entrepreneurs....And what did that mean for the American economy? The workers that moved elsewhere didn’t give up working. They found employment in other metropolitan areas, many of which developed thriving tech sectors. Those sectors weren’t fallow fields for new firm creation….But what the economics of metropolitan geography tell us is that many small collections of firms will often be less productive and less innovative than fewer, larger firm clusters. The forces that repelled workers from Silicon Valley, which was the intellectual heart of the country’s tech industry, reduced the potential economic impact of the tech boom. And in a not unimportant side effect, it reduced national productivity and total compensation in the economy.

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How to save the U.S. Postal Service: bank the 'unbanked'

In the last week, we've all learned just how dire the outlook is for the U.S. Postal Service. The Postmaster General, Patrick R. Donahoe, has been pleading for federal assistance in helping the USPS overcome not just a problem with meeting an impending $5.5 billion pension payment, but also a looming $10 billion fiscal deficit.

The post office is such a fixture of American life that the story was immediately picked up by pretty much everybody. On the left-hand side of the political spectrum, Tom Hartmann argued that Republicans have always hated the post office and that this latest crisis is a manufactured one to enable mail delivery to be privatized. On the right, GOP Congressman Darrell Issa of California had already introduced legislation in June to implement "sweeping, structural reforms" of the USPS.

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Does the Solyndra bankruptcy mean that green energy isn't the solution to our problems?

That sucking sound you just heard was a half billion in federal loan guarantees and $1 billion in investment capital going down the tubes. Solyndra, a California solar startup, just declared bankruptcy, adding 1,100 workers to the state's already swollen unemployment rolls. 

At Forbes, Todd Woody summarizes the key business issue:

Can U.S. companies developing advanced solar technology compete against low-cost Chinese manufacturers who benefit from state support and a government policy to create markets at home and abroad for their products?

Probably not. In fact, Solyndra's bankruptcy proves that you can have an innovative product (thin solar panels), major venture funding, and government support — and still not make a go of it. Of course, solar isn't everything. Gov. Brown has put forward a renewable-energy plan that's supposedly capable of creating 500,000 jobs, and that plan encompasses a range of non-fossil-fuel sources. 

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