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Economic Currents

Keep up to date with the latest UHERO news.

US Marines Moving From Okinawa - Pacific Beat Interview


The United States announced plans on June 20 to move about a quarter of the ~20,000 US marines based in Okinawa to Guam, Hawaii, the US mainland, the Philippines, and Australia over the next 13 years. Are those plans still moving forward?

Yes, they are, but an editorial in last week’s People’s Daily, a leading Chinese newspaper, added some uncertainty to the situation.  In the editorial, the legitimacy of Japan’s rule over the entire Ryukyu Island chain was questioned.  Okinawa is part of the Ryukyu island chain and it is certain that this Chinese government-sanctioned editorial did not go over well in Tokyo or Washington. If this type of rhetoric continues, Tokyo may well want the Marines to stay in Okinawa.

 
What do we know about the relocation to Hawaii?

Between 1,000 and 2,700 of the 4,700 marines being moved will likely end up on the island of Oahu.  The U.S. Dept. of Defense has commissioned three separate studies to evaluate several potential locations to house the marines.

They include the already crowded Marine Corp Air Station in Kaneohe Bay.  It currently houses 7,500+ marines.  Considerable new construction would be needed.  There could also be stress on training facilities in the vicinity.

Camp Smith, near Pearl Harbor, houses 1,700+ marines but they are mostly associated with the Pacific Command.  Housing relocated marines there is unlikely.

 

What about the other two locations?

Two other possible locations are the decommissioned Naval Air Station Barbers Point and Pearl City Peninsula.

Pearl City Peninsula is a lightly developed residential peninsula that pushes out into the center of Pearl Harbor.  It’s a good location but environmental and cost considerations could make it an expensive choice.

The decommissioned Naval Air Station Barbers Point is more intriguing.  At the end of the cold war, the Base Realignment and Closure Commission (BRAC) recommended its closure in a 1993 report and the base closed in 1999.  Since then efforts to redevelop the closed base have been a total failure.  

This location certainly has a lot of potential, but also would require major investment.  It does have an airstrip that could be brought back into use, but almost all other facilities would need to be built from scratch.  Whether Congress would want to spend the kind of money needed to bring this closed base back to life is unclear.

 

Where’s the marine relocation on the Hawaii political radar?

The story has not been extensively covered in Hawaii’s newspapers and media and so there has been little public discussion of the topic. Hawaii’s governor, congressional delegation, policymakers and legislators must surely be talking about it, as it has considerable potential to generate more medium-term construction spending. That’s important, as the Hawaii construction industry has been slow to recover from the 2008-2009 downturn and still has large numbers of unemployed or underemployed workers.  

On the other hand, Oahu already hosts several military bases, and it would not be surprising to see a backlash develop against the relocation if the new housing and facilities are located on lands not currently being used by the military.

--Sumner La Croix

 

 

 


An Insight on the Cost of Paradise

Whether visitors or residents in Hawai‘i, we are all aware of the high cost of living in paradise. One major contributing factor is the cost of energy. Households in Hawai‘i pay 4 times more than the average US household and nearly 7 times the households in Utah, where the residential energy cost is the cheapest in the nation.* While the US average for April 2013 hovered at 12 cents/kwh, Hawai‘i paid 37 cents/kwh for electricity in the residential sector.**

Breaking down residential energy consumption by source provides more insight into the high cost of living in Hawai‘i. While households in Hawai‘i supply their energy needs mainly by electricity (90%) at $110/mmbtu (equivalent to 37 cents/kwh), the two major sources in the US—natural gas and electricity—each comprise 42% of energy consumption, at roughly $5/mmbtu (equivalent to 1.7 cents/kwh) and $35/mmbtu (equivalent to 12 cents/kwh), respectively (see Figure 1). Hence, Hawai‘i is not only consuming a larger share of electricity, but also at skyrocketing prices. In contrast, the US is consuming a smaller portion from electricity at significantly discounted prices compared to Hawai‘i. This, combined with a large share of cheap natural gas in the US household consumption portfolio explains the large disparity in the cost of energy—particularly in the residential sector—in Hawai‘i and the US. Note however that switching to natural gas in Hawai‘i is not straightforward because of the logistics and infrastructure costs (liquefaction, shipping, regasification) of bringing natural gas to Hawai‘i.

 

-- Sherilyn Wee

 

 

*http://www.eia.gov/state/seds/data.cfm?incfile=/state/seds/sep_sum/html/sum_pr_res.html&sid=US **http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_6_a


The Challenges of EV Efficiency In Hawaii

Earlier this month, U.S. Department of Energy launched a website that calculates “the cost of fueling a vehicle with electricity compared to a similar vehicle that runs on gasoline”.

The mission of this gadget is to encourage consumers to switch to electric cars by:

• bringing greater transparency to vehicle operating costs

• helping drivers determine how much they might save on fuel by choosing an electric vehicle (EV)

• showing the low and steady price of fueling with electricity.

Announcing the launch of the website, the new Secretary of Energy, Ernest Moniz, stated that EVs could not only save consumers on fuel, but also reduce the dependence of our nation on oil. Those goals may be harder to achieve in Hawai’i than in the rest of the nation.

First, according to the eGallon website, while it costs the average driver in the US less than a third to drive an EV than a conventional gasoline vehicle (saving them more than 68% on fuel cost*), Hawai‘i residents save only 5 cents per gallon on gasoline (less than 1.5%). That explains why the first goal (saving consumers on fuel costs) is harder to achieve in Hawai‘i.

Second, while less than 1% of US electricity is generated from oil, Hawai‘i currently generates 75% of its electricity from oil. This explains why the second goal (reducing dependency on oil) is harder to achieve through EVs in Hawai‘i.

Finally, an often-quoted goal of increased EV penetration is to lower greenhouse gas (GHG) emissions from the transportation sector—as the largest and fastest growing component of state GHG emissions. Achieving that goal is also currently easier in the rest of the nation where more than 40% of electricity comes from cleaner sources than oil and coal (i.e. renewables, nuclear, and natural gas).

Therefore, both of the objectives mentioned by the US Energy Secretary are harder to achieve in Hawai‘i, unless consumers charge their vehicles themselves, for example using their own rooftop PV systems. That way, they could save more on vehicle fuel costs and help the State reduce their reliance on oil.

 

---Iman Nasseri and Kimberly Burnett 

 

*It is worth mentioning that both this website and much of the media tend to examine “pump prices” for passenger cars. Although EVs show a lot of promise in much of the US in terms of fuel cost per miles compared with gasoline and other alternative-fueled vehicles, considering the higher capital cost of EVs than their similar class conventional gasoline vehicles (Please refer to section 2.8 of Transitions to Alternative Vehicles and Fuels), they may not look as promising in terms of overall cost per mile.


UHERO 101.4: Record Visitors, Flat Spending

Posted June 27, 2013 | Categories: Hawaii's Economy, Blog

Last year is often described as a banner year for the Hawaii tourism industry. With record visitor arrivals close to 8 million, it is easy to come to the conclusion that tourism is stronger than ever in the state. Is the number of tourists in a destination the primary indicator to measure success of the industry? While the Aloha State certainly enjoys welcoming record numbers of visitors to the islands, does more visitors necessarily imply a stronger, more vibrant economy? More visitors may imply the need for more workers in the tourism industry, but also places pressures on infrastructure and leads to increased traffic and congestion. How else can success be measured?

An important indicator of visitor industry success is the level of real (adjusted for inflation) visitor spending each year. While UHERO calculates real visitor spending using the Honolulu Consumer Price Index (CPI) rather than a specific tourism price index that would include, for example, more hotel and car rental prices than the average resident's spending bundle, this is a common proxy for the changing cost of tourism goods and services (Bonham et al 2013). Deflating prices by the Honolulu CPI helps us understand when people are actually spending more money, versus prices just increasing rapidly.

While visitor arrivals to Hawaii have grown steadily over time (especially quickly through the late 1980’s), the level of real visitor spending has actually fallen from its peak in 1989, and has been relatively flat ever since. While there were 20% more arrivals to Hawaii last year than in 1989, they are spending 12% less money in real terms (prices are also rising). So while the beaches (and freeways!) are packed, Hawaii’s visitors are spending less (in real terms) in restaurants, shops, and hotels, potentially leaving a smaller economic imprint now than in most of the last two decades.

--Kimberly Burnett

 

Source: Hawaii Tourism Authority and UHERO

explore our data portal


UHERO 101.3: Can the Median Household afford the Median Home on Oahu?

With recent months of record low interest rates and a strengthening economy, individuals and families in Hawaii are increasingly looking into becoming homeowners. How realistic is this possibility? Do families have enough for the down payment, and will the median household income qualify for a loan? How will a monthly mortgage payment compare to the rent you are currently paying? This week’s UHERO 101 takes a look at the median income family on Oahu and examines how far that income will take them into the Oahu housing market.

We start with very simple assumptions: a required down payment of 20% and an income in which 30% or less would go towards housing. In May of this year, the median single family home on Oahu was $630k and the median condo $315k. In our calculations below we assume a mortgage rate of 4.0%.

At current interest rates, if your dream is a single family home, you will need $126k to put down initially, and an income of right over $96k. Your monthly payment would be in the neighborhood of $2,400. If condos are more your style, your down payment would be in the $63k range, and you’d need an income around $48k. This leaves you with a monthly mortgage of $1,200.

How affordable is all of this to the median household on Oahu? As the chart below illustrates, even in today’s environment of relatively low interest rates, the median family income would not be able to afford the median-priced home. Only at rates well below 3% does the median home become affordable to the median household. To add insult to injury, the reality is that both interest rates and median home prices are likely to increase in the near future. Our graphic illustrates how much less affordable the median-priced home becomes in the face of increasing rates and home prices.

We hope this simple calculation helps shed light on the “affordability” of housing on Oahu. We may need to delay the housewarming party.

 

---Kimberly Burnett and James Jones

 


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