Posted Jul 5, 2022 by Martin Armstrong
Agriculture experts are calling this season one of the most important crop years in recent history. The supply chain has barely improved, exports are expensive, and we must rely on domestically grown and raised food more than ever. Everything is connected, as are the ongoing crises. The energy crisis is adding to rising food prices as farmers are concerned about the availability of oil.
Gas prices are around 63% higher YoY as of June. The cost of diesel is over double pre-pandemic costs. Although diesel prices rose after the Ukraine invasion, prices were already on the rise. Crude oil supply in the US is at its lowest level since 2004, causing many to panic buy.
Crude production peaked in December 2019 when the nation was producing 400 million barrels per month. The Farm Bureau noted that in 2020, fuel costs represented around 3% of total on-farm expenditures. It is now estimated that the cost of fuel, electricity, and lube will increase by 34% for American farmers in 2022. This does not even factor in the fertilizer shortage farmers are facing.
“If the U.S. cannot increase production and is not importing the supplemental quantities needed to meet the increased demand, prices could continue to rise,” the Farm Bureau recently reported, “Furthermore, limited domestic refining capacity for those crude oil supplies could further strain supply availability as demand rises, which could also contribute to increased costs.”
The Farm Bureau has two suggestions for the Biden Administration – 1) crude oil producers need regulatory flexibility, and 2) allow refiners to increase domestic capacity. The agency is warning that any misstep could cause fuel prices to spike, such as the upcoming hurricane season. Every sector is begging the White House to increase demand as we are all struggling in numerous ways from America’s new energy-dependent status.