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Biofuel Rush Makes Drought a Bigger Economic Risk

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Biofuel Rush Makes Drought a Bigger Economic Risk

Economy

Biofuel Rush Makes Drought a Bigger Economic Risk

Biofuel Rush Makes Drought a Bigger Economic Risk

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As grain prices rise and ethanol makes up an increasing portion of the nation's fuel supply, a major drought in the Plains states could pose a significant threat to the U.S. economy.

Agricultural economists are warning that El Nino could cause grain shortages that could reverberate in an unprecedented way through the economy. A major drought would drive up already rising food prices and push fuel prices even higher.

While ethanol makes up about 6 percent of the nation's gasoline supply, oil refiners are assuming that the amount will increase and are deciding not to expand petroleum refineries. So if the weather hurts the crop, the crop can hurt the economy.