Corn or gasoline prices?
Posted on: October 22, 2017 at 17:16:45 CT
ScottsdaleTiger MU
Posts:
12576
Member For:
25.23 yrs
Level:
User
M.O.B. Votes:
0
The ethanol program has increased the demand for corn and an increase in demand normally leads to an increase in price for the commodity. That however does not take into account that in agriculture a price increase in a commodity usually produces an increase in production and this increase in supply may over negate the increase in price.
Ethanol increases the raw materials that go into gasoline, i.e. it's now produced form corn as well as oil. This increase in the supply of the raw materials reduces the price of gasoline if the retail price is in part determined by costs. Retail gas prices do tend to move with oil prices.