My little town in southern Wisconsin is almost completely shut off from the outside world this week. As the Rock River continues to rise as a result of two weeks of torrential rainstorms, roads in, around and out of town are being overcome by the rising waters, and we are faced with the prospect of limiting–and perhaps even eliminating–travel for the foreseeable future.

 

It’s going to take a long time–long after the flood waters have descended–to determine the full extent of the damage, but there is one effect we may see fairly soon. Here in my town, E85 ethanol has been selling for a full dollar a gallon less than regular unleaded gasoline–$2.99 vs. $3.99–but I wonder if that may change. This morning I heard on the radio that the floods are taking a very heavy toll on the corn and soybean crops in the midwestern states. The report stated that as much as 21 percent of the corn crop may already be lost, which, of course, will put upward pressure on the price of E85.

 

Losses to the soybean crop are harder to estimate, since the problem there is that the traditional June 10 planting day for soybeans now has to be pushed back indefinitely, and no one can say how that delay will ultimately affect the harvest. It is safe to predict, however, that the price of biodiesel will be adversely affected by a smaller than expected soybean harvest.

 

Of course, Hurricane Katrina taught us that Mother Nature can be a much more menacing foe than OPEC when it comes to affecting energy costs. Now here we are, a few years later, facing a similar threat, only this time two of the best solutions we have to our energy crisis–ethanol and biodiesel–may soon become part of the problem.

This entry was posted on Tuesday, June 17th, 2008 at 9:47 am and is filed under Over the Barrel. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.