Stillwater Associates Insights

How the Midwest bomb cyclone could impact gasoline prices throughout the U.S.

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Apr 8, 2019

Whoever heard of a bomb cyclone weather event? In case you haven’t, here’s the rundown: A bomb cyclone is the rapid development of a “cyclonic low-pressure area” which occurs most frequently in marine environments in the winter months but can occur in continental settings and at other times of the year. Residents and farmers living in Nebraska, South Dakota, and Wisconsin learned about bomb cyclones the hard way last month when one exploded in the Midwest with devastating effects including record flooding in areas all too familiar with a flooding Missouri River (see 2011 and 1952). Past floods have been caused by seasonal melting snow further north, causing runoff and swelling rivers. This bomb, however, came with five inches of rain and 60-degree weather towards the end of winter and well before the normal spring thawing. The still-frozen ground, which held more snowpack than normal, could absorb neither the rain nor the melting snow, forcing all the water to run off the fields and drain into the local waterways feeding the massive Missouri River.

The Midwest region is characterized by large corn-growing areas with many of the nation’s largest ethanol manufacturing plants located nearby. The corn-ethanol production process has an interesting cyclical nature – corn is harvested in August and September, but ethanol production facilities operate all year. During the times when freshly harvested corn is trucked directly to the ethanol plants, the feedstock supply chain is simple, effective, and low cost. During non-harvest periods, the corn feedstock is stored in silos, in underground bins, and in piles on the ground. When the March floods came, silos were damaged by high water, underground bins were inundated with water, and ground piles were washed away, eliminating ethanol plants’ locally available corn supply.