That's because ethanol -- mostly refined from corn -- will make up about 6% of the nation's gasoline supply this year, and that's expected to rise to 10% over the next five years. The amount of ethanol used in California gasoline is expected to grow at a faster rate, reaching 10% by 2010.
But if there were a crop shortfall, the rising price of corn would prevent ethanol distillers from earning a profit, prompting them to slash production, Babcock said.
Oil companies would have to scramble to fill that sudden gap with conventional gasoline. Prices would soar for both fuels, said Philip K. Verleger Jr., an energy economist in Aspen, Colo.
"One way to see this is to look at what happened last year," Verleger said. Industrial accidents and other refining disruptions -- all factors outside the corn belt -- cut U.S. gasoline production about 10% in February 2007, sending wholesale prices soaring, he said.
If there were a crop failure now, the U.S. would try to ease the crunch by sopping up any excess refining capacity overseas.
A slowing U.S. economy would also blunt demand. But such safety valves won't always exist. "Five years from now, this could be a big, big deal," Verleger said.
Farmers are also worried about what could happen in the short term. "A drought would be bad for everyone. The high prices would hurt my customers, and I would have no crop to sell," said Ron Heck, a fourth-generation soy and corn farmer from Perry, Iowa.
Blame oil companies for part of the problem, said Matt Hartwig, spokesman for the Renewable Fuels Assn. in Washington.
"The oil industry has just not made the investment in refineries to keep up with the demand for gasoline," Hartwig said.
As demand for gasoline outstrips refinery expansions, fuel prices will be linked more tightly with the size of the corn crop. "You might see a point where even the threat of a drought could cause gas prices to rise," Wells Fargo's Swanson said.
Lester R. Brown, an author and president of the Earth Policy Institute, sees a different scenario, one with global implications.
He estimates that as long as oil prices continue to hover around $100 a barrel, ethanol distillers could pay up to $7 a bushel for corn and still make money.
However, Brown said, "if the ethanol producers stay in the market, that will disrupt the food supply."
