In recent news, U.S. and Israeli military actions against Iranian targets have sparked concerns, particularly regarding oil prices. While the media often zooms in on oil, there’s another critical issue at play: natural gas and its role in the global food supply.
The Strait of Hormuz is essential not just for oil but also for natural gas, which is crucial for producing nitrogen fertilizers. This might sound mundane, but it’s fundamental to our food system. The Gulf region is a powerhouse for nitrogen fertilizer production, supporting modern agriculture around the globe.
Natural Gas and Fertilizer
Nitrogen fertilizers are made from natural gas through a process called Haber-Bosch. This process turns methane into ammonia, which is then converted into fertilizers like urea. Around half of the world’s food relies on these synthetic fertilizers. In fact, each year, approximately 180 million metric tons of nitrogen fertilizers are consumed globally, with about 40-50% of that trade moving through the Strait of Hormuz.
If tensions escalate and shipping through this vital route is disrupted, the food supply chain could face severe challenges. This could lead to higher food prices and lower crop yields, affecting everyone from farmers to consumers.
The Concentration of Production
The Gulf region is home to significant nitrogen fertilizer exports:
- Qatar: 5.5 to 6 million metric tons per year
- Iran: Around 5 million metric tons
- Saudi Arabia: 4 to 5 million metric tons
- Oman and UAE: Several million metric tons combined
In total, this means that disruptions in the region could significantly impact global food production.
The Timing Dilemma
The timing of fertilizer shipments matters a lot. In spring, farmers are eager to get their crops in the ground. If shipments are delayed, they might have to cut back on the amounts they use or switch to less profitable crops. This was evident in 2022 when fertilizer prices surged after Russia’s invasion of Ukraine, leading many farmers to reduce their nitrogen use.
Global Connections
Many countries rely on Middle Eastern nitrogen fertilizer. For instance, India’s fertilizer production depends heavily on imported natural gas from Qatar. Brazil also imports large amounts of urea for soybean and corn production. A disruption in the Gulf would have repercussions worldwide, not just regionally.
The Bigger Picture
While oil prices adjust quickly to geopolitical tensions, the effects of reduced nitrogen availability are slower but often more severe. Lower crop yields today can lead to higher food prices months later.
In summary, the situation in the Strait of Hormuz could affect not just oil markets but the entire global food chain. Energy security and food security are more intertwined than many realize, and the focus shouldn’t solely be on tankers and oil prices, but also on the essential fertilizers that feed us all.
For more insights on the topic, you can read reports from the FAO and Our World in Data.
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