Despite record high gas prices, it has previously been theorized that without the increase in biofuel use the past few years, gasoline might actually cost 15% more than before the adoption of these alternative fuels. This has led us to wonder whether we have become addicted to corn?
However, now, with the recent floods in the Midwest, another twist with respect to our increased reliance on ethanol has developed. The flooding that has inflicted widespread damage on the ethanol industry–ranging from the destruction of some corn crops, factory closures and transportation line disruptions, may now be responsible for a new spike in the cost of gasoline. This is because the decreased production of ethanol will increase the cost of the supplies that are available to be added to our fuel supplies. Currently, gasoline in the U.S. contains about 7% ethanol.
We may now face a situation where not only are the net environmental benefits of ethanol questioned, but our current reliance on it may also be increasing gasoline prices. If these two assumptions are correct, we may have created a situation that is a net negative. Of course, we are still in the early stages of biofuel adoption and all of its impacts are not fully understood. Nonetheless, this further illustrates the dangers of rapid policy shifts that can result in unintended consequences such as these.