US drought: Gas…

US drought: Gasoline prices rise as corn stalks shrivel

 
Since the beginning of July, the price of gasoline has risen about 16 cents a gallon, according to AAA. Energy analysts say at least some of that rise can be attributed to the severe drought scorching the Midwest plains because about 10 percent of each gallon of fuel is made from ethanol. One of the main ingredients of ethanol is corn.
Because of the drought, the price of corn has soared. It is now just under $8 a bushel, up about 23 percent on the year and up 39 percent over the past five weeks. Reflecting the rising price of corn, the price of ethanol on Chicago’s futures market is up about 11 percent since the beginning of July.
“A good soaking rain in the corn belt would help with the price of ethanol,” says Avery Ash, manager of regulatory affairs at AAA in Washington.
Ironically, the price of ethanol rose last year as well, but because of flooding in the Midwest. Because of relatively high corn prices, the price of ethanol peaked about 50 cents a gallon higher than current prices. However, a special federal tax credit helped bring down the cost for refiners. That tax credit has now expired.

Read more: http://www.csmonitor.com/Business/2012/0727/US-drought-Gasoline-prices-rise-as-corn-stalks-shrivel

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