Synthetic fertilizer prices are spiking upwards all over the world, inflicting economic pain on farmers everywhere. Another sign of the peak oil apocalypse? The industrial production of nitrogen -- a key synthetic fertilizer ingredient -- is extraordinarily energy intensive. So when energy prices rise, so do fertilizer prices. And if you buy the thesis that without manmade fertilizer the world will be physically incapable of supporting a population of nine billion, then you start to get very nervous.
Opponents of biofuels have been quick to point the finger at the stampede to divert farming land to energy crops as another reason explaining the fertilizer market's failure to keep up with global demand. But that's only one factor. Population growth and the explosion of meat and dairy consumption in the rising middle classes of the developing world are also contributing to the worldwide agricultural boom. Even without rising energy prices, the surging demand for fertilizer would be overwhelming suppliers.
When demand rises, supply follows -- and sure enough, investment in synthetic fertilizer production is booming. Intriguingly, the global center for synthetic fertilizer production appears to be the oil states of the Mideast. A new study by the Doha-based Gulf Organization for Industrial Consulting reports that UAE, Saudi Arabia, Kuwait, Bahrain, Qatar and Oman are expected to invest billions of dollars in the next few years ramping up ammonia and urea production. (Thanks to Energy Bulletin for the link.)
Which drops a big fat dollop of synthetic fertilizer irony in our laps. The growth of energy crops is in part directly attributable to rising energy prices. But the demand for synthetic fertilizer to nurture those energy crops requires the consumption of even more fossil fuel, thus likely pushing energy prices further, and creating even more demand for energy crops. On second thought, that's not ironic. That's tragic.
The price-mechanism doesn't only work in the direction of encouraging more synthetic fertilizer. One news report, while predicting that the current imbalance between supply and demand could last as long as two years before new supply came on line, observed that in the meantime farmers might be forced to "consider converting to organic production."
So you can forget about the endless argument over whether organic food is healthier for human consumption than the product of the industrial agricultural system. If synthetic fertilizer prices continue to rise, organic food may end up cheaper than the alternative.