Iowa Public Television


Rising Prices Fuel Farmers' Concerns

posted on September 2, 2005

Anyone who's been to the gas station in the past week has seen the impact of Hurricane Katrina. But drivers of flex fuel cars in west central Minnesota are being offered an alternative.

Forty service stations have adjusted prices for E-85 -- a fuel blend of 85 percent ethanol and 15 percent gasoline. The stations supplied by the Chippewa Valley Ethanol Company will keep the retail price for E-85 at 70 cents below the price of regular unleaded gasoline.

Even with such sporadic bargains, the rising cost of energy is a big concern in rural America. That's especially true now that combines are beginning to roll in the fields.


Rising Prices Fuel Farmers' Concerns

For those in the Midwest, the impact of Katrina may appear to be remote, with one notable exception -- fuel.

Gasoline prices this week rose as rapidly as the floodwaters in New Orleans, jumping more than 50 cents overnight in some regions, and surpassing the $3 per gallon mark in a growing number of U.S. cities.

According to the U.S. Minerals Management Service, 91 percent of the Gulf of Mexico's production facilities were out of commission by Wednesday and 83 percent of the natural gas facilities were shut down. The oil industry blames the increase on damage to infrastructure, including pipelines, refineries and oil rigs along the Gulf Coast.

Prices already were at 20-year highs before the hurricane. Now, with key refineries and pipelines crippled by Katrina, analysts aren't sure just how high prices will go.

With its high concentration of agricultural industries, the Midwest may be disproportionately damaged by the price surge. Agriculture is extremely dependent on fuel to move grains and livestock to processors and, ultimately, the consumer.

While the loss of oil from the gulf is significant, some analysts believe diminished supplies of natural gas due to Katrina actually will have a greater impact on Midwest citizens. Currently, natural gas prices are four times higher than their average price in the '90s.


Tags: agriculture disasters Hurricane Katrina hurricanes news oil storms weather