Oil for food program

One of the aspects of the rising price of fossil fuels that I haven't seen written about much is the fact that chemical fertilizer is largely made from natural gas. That's going to put pressure on food prices--and it suggests a natural end to the green revolution, even if that end is some time away.

The New York Times has an article on that subject today. Rising demand for grain, especially to produce the meat demanded by newly richer Asians, is bumping up against short-term inelasticity of supply. Obviously, that's going to feed back into food prices.

I wonder if it won't also start feeding back into clothing prices--cotton is an extremely nitrogen hungry plant. And I believe that most synthetic fibers are also derived from fossil fuels.

When I think of the oil economy, I usually think of innovations in transportation, or electric power. I rarely consider how much oil has freed us from the basic concern about eating and putting clothes on our back.

Comments

One thing to consider is that Russia has one of the largest natural gas reserves in the world. So it isn't that the green revolution will end per say, but rather that Russia will get very rich and powerful by selling natural gas or fertilizers cracked from natural gas.

As far as threads are concerned, rayon is derived from tree bark and there is now a technique to make threads from bamboo, which is also one of the fastest growing plants in the world. Polyester is made from hydrocarbons, but polyester is junk for people with no taste-err...an aversion to wrinkes and ironing. Yeah, that's the ticket.

Posted by freddiemac | April 30, 2008 11:01 AM

"One of the aspects of the rising price of fossil fuels that I haven't seen written about much is the fact that chemical fertilizer is largely made from natural gas."

Maybe because it's not true. The NYT article fully explains what fertilizer is made from. Read and learn.

Posted by Frank Rizzoo | April 30, 2008 11:07 AM

Frank,

The article does not explicitly state how fertilizer is made, but it explicitly mentions that chemical fertilzers are made from "fossil fuels". The fossil fuel in question is indeed natural gas:
http://www-formal.stanford.edu/jmc/nature/node23.html

I don't usually side with Megan, but she's correct in that natural gas is a component of chemical fertilizer. As natural gas reserves in the US fall, the cost of fertilizer is going up, and with it the price of those crops that make heavy use of fertilizers (read: corn).

Posted by freddiemac | April 30, 2008 11:22 AM

Last time I saw the stats, only about 9% of petroleum production went into materials production (so fertilizers, chemicals, fibers, etc)..

In any case, all of these things can be made from just about any other hydrocarbon.. they just cost more than using cheap oil. Once Oil isn't cheap anymore, these other methods will come online... and prices will again stabilize--perhaps at a higher level--but then there's just incentive for innovation, correct?

Posted by limited effects | April 30, 2008 11:27 AM

"That limitation ended in the early 20th century with the invention of a procedure, now primarily fueled by natural gas, that draws chemically inert nitrogen from the air and converts it into a usable form."

That part of the article, Frank?

Posted by Njorl | April 30, 2008 11:27 AM

From the article:

"Fertilizer is plant food, a combination of nutrients added to soil to help plants grow. The three most important are nitrogen, phosphorus and potassium. The latter two have long been available. But nitrogen in a form that plants can absorb is scarce, and the lack of it led to low crop yields for centuries.

That limitation ended in the early 20th century with the invention of a procedure, now primarily fueled by natural gas, that draws chemically inert nitrogen from the air and converts it into a usable form."

Posted by Frank Rizzoo | April 30, 2008 11:27 AM

Yes, Frank, the point was that this was one of the few articles I've seen that have covered this very important topic.

Posted by Megan McArdle | April 30, 2008 11:37 AM

Even if it becomes more valuable, the chemical fertilizer won't be worth shipping long distances. It's value is predicated on the high cost of fuel. As it becomes more valuable, it becomes more expensive to ship. Natural gas producers with economical means to deliver their product (pipelines) to agricultural areas will clean up.

What might happen, is that a safe and economical way to ship liquified natural gas might become worth developing. Many areas that are not suitable to large-scale agriculture simply vent or burn off their natural gas production because they can't sell it.

Posted by Njorl | April 30, 2008 11:39 AM

Pedantic writing is one of really attractive aspects of the comments forum in most blogs.

Posted by Will Allen | April 30, 2008 11:42 AM

Re: Cotton

If only there was some plant that was fibrous and grew like a weed with little need for fertilizer? And what if that same plant produced seeds that are an excellent source of vegetable oil, and the seeds were edible...

I guess that sort of plant is just a pipe dream.

Posted by Xmas | April 30, 2008 12:17 PM

Perhaps Frank was just using a rather insensitive method of trying to inform us that in the Haber-Bosch process (see http://en.wikipedia.org/wiki/Haber-Bosch )
the natural gas is not actually a COMPONENT of the product but merely a component in the process used for its manufacture?

I like to interpret things in the most charitable way possible.

Posted by Jens Fiederer | April 30, 2008 12:22 PM

From the Stanford site that freddiemac linked to above:

The preeminent source of nitrogen fertilizer is synthesis of ammonia from the hydrogen of natural gas and the nitrogen of the atmosphere

Ok. So we build lots of nuclear reactors, use the electricity provided by them to crack water into H2+O, vent the O, and use the H to replace the H from the natural gas.

Posted by wiredog | April 30, 2008 12:26 PM

And not just artificial fibers in clothing. Essentially all plastics are made from oil. Everything in you home, everything in your office, which is plastic is subject to price increases as the price of oil goes up.

"Better living thru chemistry." Well, only as long as oil is cheap.

Posted by wj | April 30, 2008 12:41 PM

Xmas, there's only a limited amount of time I'm willing to spend on ironing . . .

Posted by Megan McArdle | April 30, 2008 12:54 PM

Yes, I think that is the Haber-Bosch process. Requires high temperatures and pressures, and a Osmium catalyst (Caveman Chemistry by Kevin M. Dunn).

Wikipedia states the catalyst can be uranium or iron, and that price wise, use of Hydrogen from natural gas is more economical than using renewable energy to electrolytically separate water. Nothing about how cost effective nuclear power would be.

Posted by Sweet Lou | April 30, 2008 12:56 PM

Yes, wiredog, that would be the direction.

Currently electrolyzed H2 only accounts for a few % of fertilizer production.

A cheap, environmentally friendly source of electricity would solve a lot of problems.

Posted by Jens Fiederer | April 30, 2008 12:57 PM

Natural gas is why I bought some of this royalty trust earlier this spring: TIRTZ.OB. About 85% of its royalties come from natural gas, with the rest coming from oil.

Njorl,

Shipping costs haven't stopped potash, which is a component of fertilizer, from being shipped internationally. The stock of Potash Corp. of Saskatchewan, one of the biggest potash companies, soared like a late-90's era dot-com last year.

Also, there already is a relatively safe and economic method of transporting liquified natural gas.

Posted by Steve | April 30, 2008 2:50 PM

I believe electrolyzed H2 was heavily used in fertilizer production back in the 30s and 40s, and mostly abandoned since (with exceptions being, e.g., regions with massive hydroelectric surplus).

But as Jens points out, cheap electrons solve a lot of problems. Coal works, if you don't mind (or believe in) global warming. Nuclear probably will work. Solar, geothermal, and biofuels are probably each one breakthough away from being a solid answer...

Posted by Mike Earl | April 30, 2008 2:51 PM

"Shipping costs haven't stopped potash, which is a component of fertilizer, from being shipped internationally. The stock of Potash Corp. of Saskatchewan, one of the biggest potash companies, soared like a late-90's era dot-com last year."
I was referring to fixed nitrogen fertilizers.

"Also, there already is a relatively safe and economic method of transporting liquified natural gas. "

I should have specified a means that is perceived to be safe enough to overcome NIMBY concerns. Regardless of how safe it really is (which I freely admit to not knowing) what matters is how safe a politically critical portion of the destination's population believes it is. From what I recall, people don't want it, and there isn't a big market in it, despite it's usefulness.

Posted by Njorl | April 30, 2008 5:10 PM

Heaps of people want shipments of LNG. And heaps of people are getting shipments of LNG. Don't make the mistake of thinking that if it isn't popular in California then it isn't popular over the whole world, even amoung those benighted foriegners who aren't even evolved into US citizens.

"Many areas that are not suitable to large-scale agriculture simply vent or burn off their natural gas production because they can't sell it."

The price of fuel goes up, so people won't be able to sell it????? Have I read this correctly?

Posted by doctorpat | April 30, 2008 10:24 PM

"The price of fuel goes up, so people won't be able to sell it????? Have I read this correctly?"

No. That was a statement of the way things are now. Many areas with high oil production also produce a lot of natural gas, or could if they chose to. While the oil can be shipped cheaply, the gas can not. Gas requires pipelines or special tankers to carry liquified gas. Most big consumers have densly populated ports and do not want tankers with liquified gas in them, so the only common option is pipelines. While Russia can economically pipe their gas to Europe, areas like Nigeria are not close enough to their customers to make a gas pipeline feasible. So, after satisfying the small local demand, they burn it off.

At first glance, the rising cost of fixed-nitrogen fertilizer could create a market for their gas. They could convert it to fertilizer and ship that. Unfortunately, the value of the fertilizer tracks the cost of the fuel required to ship it. It will probably always remain slightly unprofitable.

Posted by Njorl | May 1, 2008 10:19 AM

well, it used to be true... Damn world keeps changing.

Posted by Njorl | May 1, 2008 10:25 AM

At first glance, the rising cost of fixed-nitrogen fertilizer could create a market for their gas. They could convert it to fertilizer and ship that. Unfortunately, the value of the fertilizer tracks the cost of the fuel required to ship it. It will probably always remain slightly unprofitable.

Transoceanic freight runs somewhere between $50-$100/tonne. Ammonia/urea prices are around $500/tonne. NG is biggest (majority) part of the cost of ammonium fertilizers. The same gas molecules that sell for $10 in North America and $15 in Europe cost less than $2 to find, develop, and produce throughout much of the middle east. You can do the math.

For what it's worth, aluminium and nitrogen fertilizer are probably the two best uses of stranded gas, but it really helps to have nearby access to an ocean port or a rail line.

Posted by bob dobalina | May 1, 2008 11:16 PM