Superstar Fortune: The energy crisis chain reaction has just begun

Consumers around the world are already beginning to feel the pressure of the global gas crisis and soaring prices in Europe and Asia. European households pay much higher prices for gas and electricity, while nearly half of U.S. consumers are gearing up for a 30 percent increase in their winter energy bills as they primarily use natural gas for heating. Consumer suffering won't stop with higher winter energy bills. Soaring natural gas prices have also triggered higher prices of food and fuel around the world. Both are set to rise in the coming months, thanks in part to the indirect impact of record natural gas prices, which are reducing the food industry and production of key components of agricultural products, according to Superstar Wealth.

In fact, soaring natural gas prices have not only directly increased household energy bills. They also indirectly affect the global food supply chain, the impact of which is likely to be felt next year. That's because reduced fertilizer production can lead to tight supplies and could influence farmers' decisions about which crops to plant next year, in order to alleviate the pain of high fertilizer costs. In mid-September, European giants in the chemical and mining to food industries said sky-high gas and electricity prices were hitting their profit margins and forcing some of them to scale back their operations.

Lower fertilizer production not only led to a spike in fertilizer prices, but also hit the food supply chain, as the production of ammonia and nitrogen produces carbon dioxide (CO2) as a by-product. Carbon dioxide is widely used in the food industry to manufacture the packaging of soft drinks and perishable foods. For example, CFIndustries, a manufacturer of hydrogen and nitrogen products, said in mid-September that it would cease operations at its manufacturing bases in Billingham and Inns in the UK due to high gas prices. The Billingham plant produces carbon dioxide, so the UK government has reached a short-term agreement with the company, which produces 60% of the UK's CO2 to ensure a continuous supply to businesses and avoid food shortages.

Rising energy prices, especially coal and natural gas, have greatly increased the cost of agricultural inputs. This includes fertilizers, which have risen more than 55 percent since January, and some fertilizer manufacturers have stopped production or reduced production capacity," the World Bank said in its commodity market outlook for the month. If energy and fertilizer prices are not as stable as expected next year, food prices will face upward pressure. The European Fertilizer Industry Association said earlier this month that "suffocatingly high natural gas prices" in Europe were making ammonia and fertilizer production unprofitable. Soaring energy prices have led to lower fertilizer production and higher input costs for farmers, which in turn has led to soaring food prices. But the fertilizer industry is more than just plant food. In the case of China, it is said to have begun restricting, or at least closely monitoring, its fertilizer exports, which has further tightened global supply and could lead to further shocks in food prices.

Superstar Wealth said that the tightening of global fertilizer supply will not spare American farmers. Corn, wheat and oat crops are sensitive to fertilizer use. In addition, for example, under the U.S. Renewable Fuel Standards (RFS), more expensive and tighter corn will raise the price of ethanol used in blends into gasoline. All in all, record natural gas prices will raise heating bills this winter, steak prices next spring, and fuel prices next summer.

This article originated from the Financial Circle Network