July 13, 2014

Why High Washington Marijuana Prices Are Not A Bad Thing

July 13, 2014
marijuana cash industry banking

marijuana cash industry banking“Twenty dollars a gram?  Ain’t no way I’m spending five hundred and sixty dollars per ounce on weed!”

My friend was reading the coverage of the opening of legal marijuana shops in Washington State, shocked at the high prices being paid for pot.  Sure, not as high a price as ten years in prison, but a steep price for my friend who’s getting pot from Oregon dispensaries at $180 per ounce.

“Actually,” I reply, “the CBS affiliate in Portland says pot is thirty-three bucks a gram at Main Street Marijuana in Vancouver, once you figure in the tax…”

“Geez, that’s…” my friend pauses, looks up and to the left, and continues, “…that’s like nine hundred twenty-four dollars an ounce!”

I’m always amazed at how my buddy never managed to grasp algebra in high school, but can run imperial to metric conversions and double-digit multiplication in his head when it comes to weed.

“Look, dude, nobody’s forcing you to overspend on weed,” I counseled.  “But if some people want to just so they can be the first to do it legally, what’s the problem?”

“Because, dude,” he answers in our dude-speak, “they’ll get all addicted to that tax money and they’ll keep the price high, making money off these tourists and newbies, and then they’ll just want to crack down harder on people growing their own.”

There’s always a “they” when I talk to this friend.  Smoking weed doesn’t make you paranoid, but some paranoid people do smoke weed.

“That’s not going to last forever,” I explained.  “Remember when we did that band tour our junior year, all across California in a damn school bus?  Remember how everyone teased me because I was the poor kid who had to pack a week’s worth of groceries in a cooler because I couldn’t afford to eat out on the road?”

“Yeah, dude, it was freakin’ hot in that bus!”

“And then I got the bright idea to buy a case of soda instead, and sell it for a buck a pop to the rest of the kids on the bus?  Back when it was like eight bucks for a case and you could buy a cold soda out of a machine for fifty cents?”

“That was pretty brilliant, dude.”

“Yeah, but remember what happened next, how two other kids then decided to buy coolers and sodas?  Boom, from that moment, I couldn’t sell sodas for a buck, because those other guys dropped theirs to seventy-five cents.”

“It was that Craig dude, the one with the really hot cheerleader girlfriend, right?”

“Right… but what I’m trying to tell you is that this is just a supply and demand thing.  You wouldn’t line up for the new iPhone or Star Wars movie, but some people will.  But that’s going to fade.  Soon enough, more of these shops will open.  They’ll have much more marijuana to sell.  They’ll have to drop prices to compete.”

“Sure, but those Washington taxes, twenty-five percent three times!  That’s gonna keep the prices high,” my friend warned.

“Maybe, but remember, not only do Washington growers and retailers have to compete with each other, the medical market, and the black market, which will eventually bring down the price, but Washington will soon have to compete with Oregon.  When we pass legalization in November, it will have home grow, eight ounce possession, thousand-dollar commercial licenses, no limits on number of producers, processors, and retailers, no limits on where investment comes from, no limits on how many licenses or types you can own, and a flat tax on flower at a buck twenty-five per gram.  Do you think those Vancouver pot shops selling at thirty-three a gram with tax will be able to compete with Portland pot shops across the river selling at five to ten bucks a gram?  Do you think a lot of business owners who enjoyed a first year or two of big marijuana sales won’t put some political pressure on lawmakers in Washington to change how they tax and regulate marijuana?”

He paused and took a hit off his vaporizer pen.  “Ah,” he exhaled slowly, “it’s the long game.  That’s why I like talking to you, dude; you see these things.”

“It’s pretty simple, really,” I offered.  “It’s just the law of supply and demand, and the supply is a weed that grows anywhere.  Without absolute prohibition, it can’t help but become much cheaper.”

Source: International Cannabis Business Conference


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