NEW YORK (CNNMoney.com) – Continued flooding in Iowa and Illinois - the nation’s top two corn-growing states - is inciting fears that the cost of the high-priced crop could soar even further, driving up ethanol and gas prices, too.
Days of heavy rain across the Midwest “corn belt” region have wreaked havoc on the crop, sending front-month prices to $7.08 a bushel on the Chicago Board of Trade Friday. Corn futures have risen for 7 straight trading sessions.
Since ethanol - a mandated ingredient in U.S. gasoline - is produced domestically with corn, rising crop prices could send already record gasoline prices even higher.
“The floods in the Midwest will have a major impact on ethanol,” said Phil Flynn, senior market analyst at Alaron Trading in Chicago.
Gasoline in the United States is comprised of only about 6% to 10% ethanol, as mandated by federal and state governments. But Flynn believes gas prices could jump 10% or 15% if corn were to hit $10 a bushel and crude oil maintains its current high level.
With the national average of gasoline at a record $4.07 a gallon, according to AAA, a 15% increase would translate into an additional 61 cents.
“Crude oil is still the predominant factor why gas prices are high, but don’t think that 6% to 10% isn’t going to matter,” Flynn said.
there are some places where the gas price is subsidized by the government… im pretty sure that is the case with the middle east, that the gas price is subsidized by proffitss from the oil industry taxes over there…
so why does corn have anything to do with gas prices skyrocketing? I ask because ethanol is not widely used yet, there is no gasoline plant there that I know of and not much of a relationship between the two products. do they use corn to produce gasoline now?
maybe i’m just a moron but i don’t understand why a flood in the midwest that is killing a corn crop would make gasoline prices go up.