Barrels & bushels: How gas prices are tied to drought, corn prices

CLEVELAND - The severe drought could force drivers to pay more at the pump. The gasoline additive ethanol is made primarily from corn, and the crop is seriously suffering this year.

Ethanol is used as an additive in unleaded gasoline to meet federal standards designed to reduce the need for oil imports, and also to cut emissions.

Approximately one-third of field corn is used for ethanol production, and that amount will need to grow because of a 2007 federal law.

The Energy Independence and Security Act requires biofuel use to increase more than 20 percent by 2022 from 2007 levels. A Department of Energy report puts this figure another way: "This would be equivalent to one-fifth of current gasoline and diesel consumption in the U.S., and far higher than the 1.6 billion gallons of biofuels produced in 2000."

The same report states the increased demand for ethanol production affects corn prices. When other factors are thrown in, such as drought, the report says prices are set to rise even further.

"Barrels and bushels are now more intertwined through corn-based ethanol," the report reads. "High oil prices boost demand for ethanol when ethanol is priced lower than gasoline on an energy-equivalent basis."

Higher corn prices have boosted prices for ethanol, and some ethanol production sites are closing or slowing production until market conditions improve, according to several recent reports.

Increased prices also are putting livestock farmers in a big jam because it's costing more to feed cattle. Many are demanding the Environmental Protection Agency waive production requirements for corn-based ethanol.

The Obama administration sees no need for a waiver, siding with corn growers - many of them in presidential election battleground states Ohio and Iowa - who continue to support the mandate.

More than 150 House members wrote EPA Administrator Lisa Jackson last week, urging her to issue a waiver. Twenty-five senators wrote a similar letter to Jackson this week (neither senator from Ohio signed).

Two representatives from Ohio signed the letter - Republican Rep. Jim Jordan and Democrat Rep. Marcia Fudge. The other 154 signatures were mainly from conservatives, and mainly from the south and southwest. Corn states like Ohio were largely unrepresented.

Experts say the recent price increases in Northeast Ohio are due to refinery and pipeline issues, and not the price of corn. But they say another future increase due to the diminished corn crop, could come next.

Late Thursday morning, the average price for a gallon of unleaded in the Cleveland area was $3.81, according to AAA's Fuel Gauge Report. The average price was $3.82 in Akron and in Canton.

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