"This Chemical Is in Short Supply,
and the Whole World Feels It"
... "Food prices, already high, could rise even further.
... Prices for the humble chemical — yes, the stuff in urine — are soaring to levels not seen in over a decade.
... In India, a lack of urea has made farmers fear for their livelihoods.
In South Korea, it meant truck drivers couldn’t start their engines.
Urea is an important type of agricultural fertilizer, so rising prices could ultimately mean higher costs at dinner tables around the world.
The United Nations Food and Agriculture Organization’s index of food prices is already at its highest level since 2011.
... Prices of two other widely used plant foods are skyrocketing as well.
One big reason for surging fertilizer prices is surging prices of coal and natural gas.
... industrial urea is made through a century-old process that turns natural gas or gas derived from coal into ammonia, which is then used to synthesize urea.
Industrial urea is produced from ammonia, generated with the Haber-Bosch process.
The manufacture of ammonia is crucial for the world’s agricultural industry for from it all fertilizers that contain nitrogen are produced.
The manufacture of fertilizers is by far the most important use of ammonia. These include urea, ammonium salts (ammonium phosphates, ammonium nitrate, calcium ammonium nitrate) and solutions of ammonia.
An increasing amount of ammonia, although still small compared with other uses, is used as a concentrated solution in combating the discharge of nitrogen oxides from power stations.
Ammonia ranks second, to sulfuric acid, as the chemical with the largest tonnage. It is being increasingly made in countries which have low cost sources of natural gas and coal (China and Russia account for ca 40%).
The manufacture of ammonia from nitrogen and hydrogen takes place in two main stages:
a) the manufacture of hydrogen
b) the synthesis of ammonia (the Haber Process)
Hydrogen is produced from a variety of feedstocks, mostly from natural gas, coal or naphtha.
The ways in which hydrogen is obtained from these feedstocks are dealt with separately.
The manufacture of ammonia (The Haber Process) ... is of such importance to our lives that it has figured in three Nobel Prizes in chemistry, all to German scientists, over a period of nearly 90 years, a remarkable record.
The Haber Bosch process feeds half of humanity
About 25% of bulk chemical natural gas consumption is used as a feedstock for fertilizer production, fossil fuels contribute to the value added to our economy by farming.
The Haber-Bosch process, which manufactures synthetic fertilizer from natural gas and atmospheric nitrogen, feeds nearly half of the world population.
Trends in human population and nitrogen use throughout the twentieth century.
Of the total world population (solid line), an estimate is made of the number of people that could be sustained without reactive nitrogen from the Haber–Bosch process (long dashed line), also expressed as a percentage of the global population (short dashed line).
The recorded increase in average fertilizer use per hectare of agricultural land (blue symbols) and the increase in per capita meat production (green symbols) is also shown. Erisman et al., 2008
The investment community has also been fighting a War on Fossil Fuels…
... The true origin of today’s energy crisis isn’t the 2020 COVID crash, but rather, the 2014 oil-price collapse.
In the first years of the last decade, China’s strong growth propelled a global commodities boom, and kept the price of oil hovering around $100 a barrel.
This was a boon to energy investors in the short run.
But the rally sowed the seeds of its own undoing.
Forms of energy extraction that had been prohibitively expensive when oil was trading at $60 a barrel suddenly became eminently profitable.
Capital poured into America’s shale industry.
Thus, the supply of fossil fuel on global markets rapidly increased.
At the same time, slowing global growth combined with advances in energy efficiency lowered global energy demand.
Traditionally, OPEC would have responded to such conditions by trying to stabilize global prices by pumping less oil.
But Saudi Arabia saw opportunity in a sustained energy glut.
As a conventional oil producer, Saudi Aramco had a much lower break-even price than America’s shale drillers.
And as a sovereign government with a foreign-currency reserve worth $750 billion, the Saudis could afford to sell energy at a loss for a lot longer than private firms in the Permian basin.
Thus, by keeping the taps on and allowing global energy prices to crash, the House of Saud could reclaim the global market share that frackers had so rudely wrestled from it.
As a result, the price of oil plunged by 70 percent between mid-2014 and early 2016.
All this had two lasting consequences for global energy markets that are integral to today’s crisis.
First, investors’ appetite for new oil and gas production collapsed. Global capital craves steady returns, not 70 percent price swings.
Long-term shareholders in fossil-fuel firms pressured managers to cut back investment in favor of dividends.
Many such shareholders had sustained heavy losses during the crash, and therefore refused to sanction risky new projects until they recouped their initial investments.
Second, the combination of advances in fracking technology and a glutted energy market made natural gas unprecedentedly abundant and cost-competitive with coal.
Utilities therefore started replacing coal-fired power plants with gas-fired ones, and the global electricity system became newly reliant on natural gas.
The sustained efforts of activists to defund fossil fuel companies, coupled with the investment community’s demands to “to cut back investment in favor of dividends”
have caused the inability to ramp up production fast enough to keep up with surging demand.
And this is why we suddenly have a synthetic fertilizer crisis…
... A shortage of nitrogen fertilizer due to soaring natural gas prices is threatening to reduce global crop yields next year, CF Industries, a major producer of the crop nutrient, said on Thursday.
European gas prices have jumped amid high demand, as economies recover from the pandemic and with below-average gas storage levels at the start of the winter heating season.
Natural gas is a key input in the production of nitrogen-based fertilizers and higher costs have caused some producers to cut production.
Efforts to defund the oil & gas industry and the investment community’s demands that we focus on investor returns rather than growth,
while also reducing the carbon intensity of our operations have driven natural gas prices through the roof in areas of the world dependent on imported LNG.
This has left us in a situation where many nations will have to choose between freezing in the dark this winter or facing food shortages come spring.
Reference:
Erisman, J. W., Sutton,
M. A., Galloway, J., Klimont, Z.
& Winiwarter, W.
How a century of ammonia synthesis changed the world.
Nat. Geosci.1,636–639 (2008)"