(July 31 2012)
U.S. gasoline prices rose 5.1% in July, their largest month-on-month increase in more than twelve years with rising corn prices largely to blame.
July gasoline prices rose $0.17/gallon, according to the AAA Monthly Gas Price Report. The U.S. average gasoline price hit a summertime low of $3.326 per gallon on July 2 and have risen to an average of $3.50/gallon. About four to five cents of the increase were due to higher ethanol prices, making it “a serious contributing factor,” according to a AAA spokesperson.
Almost all the gasoline that’s used in the U.S. has a 10% blend of ethanol in it, and most ethanol is produced from corn. As corn raced to a record high amid hot, dry weather, ethanol prices soared, climbing 17% in July. Typically, for every 10 cents the price of ethanol changes, the price of gasoline is going to change by one cent.
July’s increase reversed a steady decline at the pump since March, and represented the biggest price increase for July going back to at least 2000, when AAA’s records began.
Other factors played into the spike of gasoline prices, including the increased demand for gasoline in the summer driving season and higher crude oil prices.
AAA expects prices to remain flat or see a small increase in August.