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Gas Prices To Rise Due To Drought Conditions; Could Play A Negative Role In The U.S. Recovery

(Photo by Chip Somodevilla/Getty Images)

The careful news follower has already heard about the expected rise in prices at the grocery store due to this summers harsh drought conditions across the country.  What you may not have expected was how this dry season will affect prices at the gas pumps.

Even if you’re not using gasoline that’s clearly labeled as Ethanol, up to 10% of every gallon of gas in sold many parts of the Unites States is comprised of that corn derivative.  Corn prices have rose almost 55% since mid-June;  As corn prices rise, they’re taking Ethanol and gasoline prices with it.

Much will depend on whether the drought eases or deepens. A report this week from the U.S. Department of Agriculture found that 38 percent of the corn crop in 18 corn-producing states was either in poor or very poor condition. Last year at this time, the figure stood at 11 percent. But lower temperatures and more rain could still make a difference, improving the crop and cutting ethanol prices.

The unspoken worry about rising corn and gasoline prices is the role that they play with the weak U.S. economy.  Financial observers agree that the one saving grace in the face of record-high unemployment and low consumer confidence has been that fuel prices have remained lower than predicted.  The drought – along with those rising corn prices – could be the pothole that derails the current static U.S. economy.  The implications of that could be felt in Washington D.C. and in the election polls this fall.

 

Drought sends gas prices higher – SFGate.

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