Higher Gas Prices? Consider the Drought

Gasoline prices in the United States rose over the past two weeks, driven partly by supply disruptions and a drought-induced rise in ethanol prices.

The rise was partly the result of temporary supply disruptions at refineries and an increase in the cost of corn-based ethanol caused by a severe Midwestern drought.

U.S. law requires a certain amount of ethanol to be sold, and much of it gets blended into gasoline.  Right now, its impact on gasoline is that it’s adding to the cost.  While it pales in comparison to the impact of crude oil prices on gasoline, it’s among the non-crude items that has pushed up the price lately.

Under the five-year-old Renewable Fuel Standard, U.S. fuel companies are required to ensure that 9 percent of their gasoline pools are made up of ethanol this year, which means converting some 40 percent of the corn crop into the biofuel.

As reported by Reuters.

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