Editor's Note: Last week we offered our completely subjective Top 10 news stories of 2022 that impacted the asphalt industry in California. You can read the story HERE. This week we’re back with our fearless prognostications for 2023. If you would like to see how we fared with our predictions a year ago, you can read that story HERE. For more detailed information and economic analysis, CalAPA members should refer to the “2023 Asphalt Market Forecast for California” report that was sent to members on Dec. 6. Another source of insight, the annual forecast issue of CalAPA’s official magazine, “California Asphalt,” will hit mailboxes later this month.
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1. Crude oil prices will continue volatility, influencing local asphalt prices
Prices for crude oil, which is refined to make liquid asphalt, will continue to experience volatility in 2023, influenced by global events such as the war in Ukraine and China’s shifting COVID-19 policies, and those prices will heavily influence the price of asphalt. A much hyped campaign by Gov. Gavin Newsom and some members of the Legislature to lay the blame for high pump prices on oil industry profits will fizzle, leading to renewed scrutiny over California’s incoherent energy strategy.
2. Industry consolidation trend continues
The consolidation trend continues to ebb and flow across the asphalt pavement industry in California, with longtime family businesses being acquired by national or international firms, remaking the competitive landscape in the state.
3. Austere state budget sees sharp revenue declines, hiring freeze
California Gov. Gavin Newsom unveils his proposed budget for the 2023-24 fiscal year that represents the first “austere” budget of his administration, forecasting that tax revenues will decline sharply in the state due to the onset of an expected economic recession. The recent hiring boom at Caltrans will come to an abrupt end. The Legislature will add back some programs before the budget it approved just prior to the start of the state’s fiscal year on July 1, but overall the state finances will enter a lean period after years of growth.
4. HMA public work remains below expectations in early 2023, but picks up as the year progresses
Asphalt-related work at the state and local level, constrained by bureaucracy and inertia, will start slow in early in 2023 but begin to break free in the form of more paving work in the latter part of the year thanks in part to the influx of federal infrastructure funding and pressure to convert the dollars into projects heading into the 2024 election cycle. Caltrans will also release a revised formula utilized to calculate the lifecycle cost of pavement projects that is the source of contention between asphalt and concrete proponents. The Caltrans recommendation will be informed by recent economic studies on the topic and influenced by soaring inflation.
5. More recognition for Long-life Asphalt Pavement design strategy
In a first, a Long-life Asphalt Pavement project will garner national recognition at a meeting of the California Transportation Commission, eliciting kudos to Caltrans designers and the joint venture contractors who constructed the project on Interstate 5 in Sacramento. The Long-life Asphalt Pavement Design strategy promises pavements that last 40 or more years with minimal maintenance.
6. COVID-19 settles in to a ‘new normal’
The COVID-19 pandemic, which has dominated the headlines since 2020, will finally begin to recede and a “new normal” will take its place, where the spread of the virus remains at relatively low levels and causes minimal workplace disruptions.
7. Newsom to run for for president in 2028, but not 2024
Despite widespread speculation to the contrary, Gov. Gavin Newsom will keep to his public statements and not run for president in 2024. However, he will increasingly look for ways to increase his prominence on the national stage in the coming year, which will be criticized at home and be dismissed by East Coast elites. Bonus prediction: Newsom for President in 2028 is a virtual certainty.
8. Continued dysfunction in Washington
The razor-thin Republican majority in the U.S. House of Representatives, and a messy intra-party battle for control, plus Democratic control of the U.S. Senate, will guarantee a divided government and gridlock in Washington for the next year and beyond. There will be less substantive policy-making and more hearings and investigations that have little connection to pocketbook issues of everyday Californians, and those trying to operate profitable businesses in the Golden State.
9. CA vehicle regulations headed for Supreme Court test
A federal appeals court will rule that ambitious clean-air regulations and greenhouse-gas initiatives pushed by California bureaucrats lack authority under a legal concept known as the “Major Questions Doctrine” that requires congressional approval for such sweeping action. The ruling sets up a showdown in the U.S. Supreme Court in 2024.
10. Economic downturn eases pressure on job market
An economic downturn will take hold in early 2023, resulting in a slowdown in hiring and temporarily easing pressure on the job market for asphalt pavement industry workers. At the same time, the various pandemic-created disruptions in how work is performed, such as remote work, will be recalibrated in 2023, creating friction between employers and employees seeking to find a post-pandemic equilibrium.
Honorable mention: Environmental regulations will continue to proliferate in 2023 and beyond, continuing a trend that has been roust in California for many years. Also, expect Mother Nature to reassert herself in 2023 in the form of several natural disasters during which asphalt’s speed-of-construction attributes will be on full display. Corruption, malfeasance and garden variety incompetence will also make regular appearances in 2023, providing a fresh reminder for anyone in a position of leadership (and everyone else) to reacquaint themselves with ethics and conflict-of-interest policies, and ensure that they are imbedded into the culture of every company and organization at every level.
And finally: Do you think there’s something important missing from this list? Feel free to drop us a line HERE with your 2023 prediction (be sure to state “2023 Prediction” in the subject line or text of your message.) The best prediction that actually comes to pass in 2023 will be eligible for a prize and recognition in this newsletter.
