The Geographic Complexity of the Marijuana Industry

marijuana

The geographic complexity is unique to the marijuana industry.

In some states, it is legal for adults to use it for recreational purposes. In other states it is illegal, and still some states have legalized the use of marijuana for medicinal purposes. However, in every state federal regulations clog the flow of products and money across state lines.

There is an economic reason why marijuana has different prices in dispensaries throughout the country. How different are they?

To discover the answer to this question, Price Economics analyzed data from Wikileaf, which is a company that tracks the prices of marijuana across the country. This data was used to compare the price of cannabis on the East Coast versus the West Coast.

Marijuana is 22.5 percent cheaper on the West Coast. The reason for the difference is mostly due to a combination of the supply of growers combined with federal prohibitions on transporting across state lines, according to Price Economics.

The price of marijuana varies widely. For example, in cannabis in San Francisco costs nearly 50 percent more than in Portland, Oregon. What drives the price variation among western states is the differences in the cost of doing business, local taxation, and supply.

Recreational cannabis is recreationally legal in nine states and Washington D.C. The legal states in the West are Oregon, California, Colorado, Washington, Alaska, and Nevada. The Eastern states are Vermont, Maine, Washington, D.C., and Massachusetts.

First, this article will observe the cost of an eighth of an ounce of marijuana on Wikileaf in the West Coast cities and the East Coast cities.

On the East Coast, an eighty is $46.30 compared to $36 on the West Coast. This is a difference of 22.5 percent. A phone does not cost a lot more on the East Coast versus the West Coast, neither do prescription drugs, so why the difference in cannabis?

The reason marijuana is less expensive on the West Coast is predominately due to two things: there are more growers in the West and cannabis is illegal to ship across state lines as it would violate federal law. States that have more growers have more supply and can sell their product for less.

A recent article in Fortune highlighted Oregon’s supply issue. According to the article, “Marijuana is currently selling as cheaply as half-price in Oregon at the moment, because of a glut in supply.” The state is producing more marijuana than it can consume, and the excess supply cannot be legally shipped to other states. As a result, local prices come down.

Any quantity of cannabis that can be purchased costs less in the West than it does in the East. Purchasing marijuana in the West is 13.5 to 25.7 percent cheaper. The discount in price decreases the larger the quantity, however, it is still significantly more expensive in the East at any quantity.

This survey compared eight cities on the East and West Coast. They are Baltimore, Maryland; Boston, Massachusetts; Seattle, Washington; San Francisco, California; Portland, Maine; Denver, Colorado; and Portland, Oregon. The top two most expensive cities for purchasing marijuana are Baltimore and Boston. The Eastern region has cold winters and limited agricultural lands than in the Western region. Cannabis in Baltimore is nearly twice as expensive as it is in Denver.

The fact that the supply of cannabis cannot cross state lines is only part of the reason for the variation in prices among cities. Another reason for the price variation is local taxation laws and the cost of living in a specific area. Typically, each state levies an additional sales tax on cannabis. In addition, there is a local city and a regular sales tax on marijuana. In some cities, that can add up to 35 percent to the price. The taxes combined with a higher cost of living associated with expensive cities like San Francisco, means the cost of marijuana in some Western cities can rival the legal cities in the East.

Yes, cannabis is significantly cheaper in the Western United States. Primarily, this is driven by federal law, which makes it illegal to transport marijuana across state lines. States with lots of agricultural land dedicated to growing a large supply drives the prices down. According to Price Economics, “In order for a national marketplace for cannabis to emerge with more consistent pricing by location, a change to these federal laws will be required.”

By Jeanette Smith

Source:

Priceconomics: Here’s How Much Marijuana Costs on the West Coast vs East Coast

Image Courtesy of herbalhemp’s Pixabay Page – Creative Commons License