Editor’s Note: Last week we offered our completely subjective Top 10 news stories of 2020 that impacted the asphalt industry in California. You can read the story HERE. This week we’re back with our fearless prognostications for 2021. If you would like to see how we fared with our predictions a year ago (spoiler alert: we missed the pandemic), you can read that story HERE. For more detailed information and analysis, be sure to look for the 2021 annual forecast issue of CalAPA’s official magazine, “California Asphalt,” which will hit mailboxes later this month.
No. 1: Global pandemic continues to cast long shadow in California
No surprise here (again). The global coronavirus pandemic, which upended pretty much everything in 2020, will continue to be felt in 2021. It is certain that California will begin the year with record-breaking numbers of COVID-19 cases, hospitalizations and deaths. Promising vaccines, recently approved and in the distribution pipeline, will take months to be administered. The asphalt industry is in a broad category of “essential” activities and will have access to the vaccine before the general public, but it likely will be well past mid-year before California approaches anything remotely resembling the “herd immunity” that will lead to relaxation of various public health restrictions put in place to curb the spread of the virus. The pandemic will likely weigh on volume of work in 2021, but the latent demand, particularly for affordable housing, should lead to a robust return of work in the latter half of 2021. Vehicle-miles Traveled, a closely-watched metric that is linked to gas taxes and transportation dollars, will trend upward and reach pre-pandemic levels by year’s end, ensuring that funding for public works projects will continue to flow unabated.
No. 2: Bipartisan agreement (finally) on a federal transportation bill
The partisan gridlock that has become the norm in Washington will finally break free in 2021 as both Republicans and Democrats cobble together a long-term transportation funding bill that addresses the persistently underfunded Highway Trust Fund and recognizes the economic stimulus effect of infrastructure construction to the recovering economy. Lawmakers will be seeking to avert a deficit in the Highway Trust Fund that is projected to reach $192 billion by 2030 without action. The key difference in 2021 from previous years: the return of earmarks, which will allow individual lawmakers to add projects to the bill and create an incentive to vote for it.
No. 3: Global oil prices continue to place downward pressure on asphalt prices
Ranked as our top story of the past decade, the global glut in oil, coupled with reduced demand, has placed downward pressure on crude prices, which has also translated to lower prices for liquid asphalt. The benchmark Caltrans Crude Oil Price Index, which is used to adjust asphalt price payments, was averaging over $500 per barrel from 2011-2014, but starting in 2015 dipped below $300 a barrel, where it has largely remained ever since. That trend will continue through 2021, saving public and private project owners vast sums of money on paving projects. The Caltrans Crude Oil Price index briefly dipped below $200 earlier in 2020, owed largely to reduced travel early in the COVID-19 pandemic, before setting in at $229.7 in December. Prices will drift slightly higher as the year progresses and demand increases, but will not reach $300 by the end of the year.
No. 4: Equity, social justice issues will dominate 2021
The “Black Lives Matter” street protests that occurred in the Spring and Summer of 2020 will give way to a more robust dialog in 2021 about persistent economic inequalities in California as it relates to race. The California Department of Transportation will be finishing up a disparity study and will be establishing new goals for public contracting by minority-owned and women-owned firms in state public works contracting. A new presidential administration, as well as the Newsom administration in California, has already pledged to examine transportation policy to address equity issues. Social justice elements will also be woven into the environmental movement in California, placing additional pressure on industrial facilities in California that are often located near poor neighborhoods.
No. 5: Workers will continue to be in high demand
This is a perennial entrant on this list in recent years. The construction industry workforce in California contracted by about 4 percent in 2020, but as the state begins to put the COVID-19 pandemic behind it in 2021 demand for workers will pick up and continue as the year progresses. Increasing pressure to build more affordable housing to stem an exodus of Californians to other lower-cost states, plus additional infrastructure spending, will mean construction jobs will be plentiful and employers will be under increasing pressure to recruit and hire qualified workers to meet the demand, and there will be a need for workers to staff asphalt plants and other construction materials facilities.
No. 6: The economy will break out in 2021, fueled by pent-up demand
After a miserable 2020 filled with pandemic restrictions and death, the California economy is poised to rocket out of the doldrums in 2021 and the state and the nation are eager to return to some semblance of normalcy. Federal stimulus payments will ease some of the economic pain of those hardest hit by the pandemic, and lifting restrictions will lead to robust economic activity that will lift all sectors of the economy as the year progresses. Construction activity, a key barometer of a strong economy, will pick up where it left off in 2019, and various public and private projects that consume asphalt will move forward at a brisk pace.
No. 7: Environmental regulations will dominate the news headlines
California’s elaborate web of environmental regulations will continue to get more complex and costly in 2021 as elected officials and regulators will face increasing pressure to further reduce air pollution and address ambitious climate-change goals. An incoming Democratic presidential administration will mean that California will spend less time fighting environmental regulation rollbacks in Washington, freeing up more time to focus on California-centric regulations. In a bright spot, however, several new members of the California Air Resources Board will signal a willingness to work more collaboratively with industry, and leverage industry expertise, to develop regulations that are more reasonable and implementable.
No. 8: California’s influence in Washington will be greater than it has been in decades
With California Sen. Kamala Harris becoming vice president of the United States, plus the new Biden administration filling many top posts with prominent figures from the Golden State, California will enjoy the most influence in Washington that it has in decades. The “domino effect” of appointments, which already started to be felt in the latter part of 2020, will continue into the new year. California Secretary of State Alex Padilla will be sworn in as the first Latino Senator in California’s 170 history, and his post will be filled by Assemblywoman Shirley Weber, who will become the first African-American to hold the post. Also departing for a cabinet secretary position in the Biden Administration: California Attorney General Xavier Becerra. Filling the vacancies falls to Gov. Gavin Newsom, who will receive generally good marks for managing the pandemic response and survive a recall attempt. Other prominent Californians will appear in the Biden-Harris administration as the year progresses. Additionally, Californians Nancy Pelosi will return as Speaker of the House,and Kevin McCarthy will remain House Minority Leader. Overall, Caifornia's Congressional delegation, at 55, will hold sway in every aspect of federal policy. Not since former California Gov. Ronald Reagan occupied the Oval Office in the 1980s will California have as much influence in Washington as it will in 2021.
No. 9: ‘Resiliency’ will become mainstream
With climate change dominating the headlines in 2021 and beyond, increasing attention will be paid to how to protect the state’s infrastructure from the potential negative impacts of global warming and rising sea levels, and “resiliency” will be the new buzzword to enter widespread usage. This will be a factor as public works officials plan and design transportation improvements, particularly in areas along California’s 840 miles of coastline that could be vulnerable to weather-related damage. Asphalt’s speed-of-construction advantages will be on display in numerous emergency repair projects.
10.: Debut of new statewide specification for asphalt pavements appropriate for cities and counties
Partly due to funding from SB1, the Road Repair & Accountability Act of 2017, the City & County Pavement Improvement Center consortium will publish a new asphalt pavement specification appropriate for use by cities and counties that experience a lower volume of traffic than major highways and interstates. The working title of the specification is the “Hot Mix Asphalt-Local Government” specification and it is modeled after the “Superpave” design strategy and incorporates many elements from Section 39 of the Caltrans Standard Specifications. The debut of the specification will culminate more than 10 years of work by CalAPA, Caltrans and local public works agency personnel, and builds on work done by the Caltrans-industry Pavement & Materials Partnering Committee (previously known as the Rock Products Committee), the University of California Pavement Research Center and others.
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Do you think there something important missing from this list? Feel free to drop us a line
HERE with your 2021 prediction. The best prediction that actually comes to pass in 2021 will be eligible for a prize and recognition in the newsletter.
