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Gasoline Prices Set to Rise if Corn Belt States Win Fuel Fight

 

Some Americans could end up paying more for their gasoline thanks to a plan by seven Midwestern state governors to boost the use of corn-based ethanol.

Their request is under review by the federal government. If adopted, it could be good news for corn farmers throughout the region, including the politically important state of Iowa.

But it would also force oil refiners supplying the Midwest to provide a specialized gasoline grade and construct new storage tanks and other infrastructure. That has the potential to increase costs, which would likely be passed on to consumers already squeezed by soaring inflation. Prices at the pump are seen rising by at least 2 cents per gallon in affected states, according to a study by consultancy MathPro Inc., though some industry groups say the costs could be much higher, especially if the change is implemented this summer leaving little time to provide adequate inventory.

That risks undoing some of President Joe Biden’s historic efforts to tame runaway gasoline prices, which his administration regards as a major political threat. The average cost of a gallon of regular is now well below the $5-plus peak seen last summer. But prices have been creeping higher again recently, gaining more than 19 cents in a two-week period ended Jan. 6 after a winter storm disrupted oil refining.

It’s the latest example of how Biden’s desire to quash inflation is proving difficult to reconcile with other goals, such as keeping a politically important constituency happy, or his green agenda. He has made repeated pleas to the oil industry to increase output to help guard against surging pump prices, but that has angered environmentalists and even the fossil-fuel producers themselves. U.S. oil refiners have cited a slew of operational and policy constraints, including capacity cuts made during the pandemic, as reasons why they could do relatively little to boost gasoline supply last year when fuel costs jumped.

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Published on 1/20/2023 (11 days ago) Oil/Gas