Governor-elect Phil Murphy’s vision for New Jersey includes weed, and lots of it.
The Democrat has promised to legalize recreational use for people age 21 and older within the first 100 days of his administration. And if he and the state Legislature play their cards right, the price of pot could plunge, according to historical price data and national experts.
But the path to cheaper weed prices is unlikely to be straight and narrow.
“New Jersey may fall into the camp of states with a strict market,” said Adam Orens, co-founder of Marijuana Policy Group. “And with strict markets, prices can be an issue.”
Marijuana remains illegal in most states, and that means collecting reliable information on prices and price changes can be difficult. The best sources currently rely on crowdsourcing – people who buy and sell marijuana on the black market, reporting their own prices.
According to Priceofweed.com, which has collected tens of thousands of user submissions from across the country, the highest-quality illegal marijuana in New Jersey currently costs $345 an ounce, while medium quality costs $299.
In comparison, in Colorado, which legalized recreational use in 2014, dispensaries charge an average of $242 for a high-quality ounce, according to the website. Specials and member deals can push the price as low as $99.
“In an illegal market, the risk involved drives up the price,” Orens said. “Here (in Colorado), prices have declined nearly every month.”
Like any good on the market, a lot of factors can affect prices, but they will generally be driven by the basic principles of supply and demand: How much legal weed will be grown and available in New Jersey, how many stores can sell it, and how many people want it?
There’s little doubt demand will be strong, so whether the price plunges in New Jersey largely depends on how legislators handle the first two questions. The more they open the floodgates, the lower the price. The more restrictive the rules, the higher the price.
“In general, with more supply and more producers, prices will fall,” said Rosanna Smart, an economist for the RAND Corporation.
Take Washington and Colorado, two of the earliest states to legalize recreational use.
Residents quickly moved from the black market into the new, legal market, but growers and distributors were slow to adapt and build up a supply, and so prices spiked.
“Medical wasn’t big in Washington at first, so when recreational was legalized, they needed time to ramp up,” Smart said.
After all, weed’s a plant — it takes time to grow.
As the market adjusted, both states’ prices slid steadily downward, with minor bumps and slips on holidays and April 20th (AKA 4-20, the unofficial pot holiday).
Prices have now stabilized and remain low, Orens said.
Other states, though still early in the legalization process, seem high by comparison. Nevada had to pass emergency measures to deal with the supply struggle, partly because the only legal distributors at first were licensed liquor distributors.
Oregon imposed stricter limits on testing regulations, leading to a bottleneck as cultivators tried to get their product to a lab, said Keith Holecek, managing director at Cannabis Benchmarks, a market-tracking company.
So what needs to happen in New Jersey for prices to plunge?
Unlike Colorado, New Jersey would start with only a handful of medical marijuana dispensaries — five in operation, and a sixth in the growing stage — that serve about 15,000 patients, according to state statistics.
Ramping that up to a market of upward of a million people would take a lot of work. And that means a lot of infrastructure to be built, and state regulations to be written.
Sen. Nicholas Scutari, D-Union, the sponsor of the legalization law, said he thinks medical dispensaries would quickly become overwhelmed by demand for recreational weed. The market would open when the newly licensed growers would be ready, Scutari has said.
Current proposals also include a series of sales tax increases, eventually setting the levy on recreational marijuana at 25 percent, which could also affect price trends. Murphy is banking on an estimated $300 million in tax revenue to pay for his policy agenda.
All of the moving pieces mean the heyday of low prices in the Garden State may have to wait a year or two, at least. Still, the marijuana industry sees big potential, Holecek said.
“Going from a small number of patients to eight or nine million people, there’s a large opportunity for a recreational market,” he said. “And there’s a huge opportunity so close to major potential markets, the metropolis.”
“There would people deciding East Rutherford’s a great place for bachelor parties,” he said.
thumbnail courtesy of nj.com