Last week at the Milken Institute Global Conference in Los Angeles, an executive from the International Chamber of Commerce issued a stark warning. John Denton, Secretary General of the ICC, highlighted that the blockage of fossil fuels through the Strait of Hormuz is about to create a huge cataclysmic problem in the real economy, particularly concerning food. He emphasized that people are not fully aware of the critical impact on fertilizer access, which threatens to disrupt global food supply.
Fertilizer and Food Production
Fertilizers, especially nitrogen-based ones, are produced using massive amounts of fossil fuels. Estimates suggest that up to 50% of the world's food production depends on these fertilizers. The link between fossil fuels and food is becoming more apparent as the crisis unfolds. Without fossil fuels, half of humanity would face severe food shortages, as noted by Bjorn Lomborg in a recent FP Comment article.
Impact on Developing Countries
For developing nations, the spectre of food shortages and soaring prices is frightening. A TD Bank report cited an IMF estimate that in the poorest countries, food accounts for 44% of household spending, compared to 16% in advanced economies. Shifts in food price and supply could have dramatic impacts, leading to malnutrition or even starvation.
The direct connection between fossil fuels and food production is rising above popular perception. The primary link is through fertilizers, which require burning fossil fuels to generate intense heat for producing nitrogen/ammonia fertilizers. This process also emits carbon, adding to environmental concerns.
While the immediacy of the crisis is debated, the underlying risks are clear. The blockage in the Strait of Hormuz, a critical chokepoint for oil and gas shipments, could exacerbate fertilizer shortages and drive up food prices globally.
