Why is California Shipping So Expensive?

Black Friday deals, Cyber Monday steals, pre-Christmas sales … if it’s one thing we all know how to do, it’s finding reasons to shop. As we enter one of the busiest periods for shopping, consumer behavior is also greatly reflected within the shipping industry. 

How Has the Pandemic Influenced Shipping?

Over the last two years, consumers worldwide may have noticed an increase in their shipping costs. The pandemic has done a good job of raising the cost of goods and services in every industry, and shipping has been no exception. 

During the first phase of the pandemic, shipping worldwide had taken a short dive, but as the time inside lengthened, the demand for shipping quickly bounced back from the initial crawl, as people began to do more online shopping.

Data from United Nations Conference on Trade and Development ( UNCTAD ) found that between April 2020 and April 2021 containerized freight from Shanghai to North America nearly doubled. While all this is true, there are some states which are feeling the heightened shipping costs more than others. One such state is California.  

What Influences Shipping costs?

The cost of shipping is influenced by many factors, some of which include fuel costs, demand on freight and maritime, and taxes and duties. California currently has the highest cost of fuel nationwide, at an average of $4.71 per gallon, in comparison to $3.41 nationally.

Can Cost of Living Influence Shipping Costs?

The short answer is yes. 

The cost of living in California also tends to lean on the higher side, as opposed to other states. This includes taxes and duties. According to a 2020 study by the Council for Community and Economic Research, the average city in California has a 38% higher cost of living than the average city nationally. The day-to-day cost is also tremendously affected by the taxes, as they currently rank at the ninth-highest total sales tax rate in the nation. (Ramsey Solutions, 2020)

Demand v Supply

And, as if California didn’t already have their hands full with high fuel and tax rates, mismatched demand and supply is also a reason for the heightening in shipping costs. The surge in demand during the pandemic caused what is being referred to as a “Logjam.” This simply implies that ships are unable to discharge products quickly enough to meet demand. This also causes a shortage in shipping containers. The port of Los Angeles has had increased wait times from two days to six!

In Conclusion…

So, if you are living in California, or operate a business or company that ships to California and have noticed disparities between the shipping cost for California and other states, you are not alone. 

Unfortunately, as taxes and fuel vary from state to state and are set based on a number of factors (not to mention California currently has some of the nation’s highest taxes and fuel costs) it is unlikely that the shipping rates will decrease to that of other states.