Explained: Why higher gas costs lead to higher food prices

Gas prices are soaring, leading to higher food prices for European consumers.

What explains this connection?

One of the factors behind this trend are fertilisers, which farmers use to provide plants and crops with the nutrients they need to grow.

Over 70% of fertilisers manufactured in Europe are nitrogen-based.

The production of this kind of fertiliser requires two main elements: nitrogen from air and hydrogen from gas. Together, they generate ammonia, the foundation of nitrogen-based fertilisers.

Gas is used both as a raw material and an energy source to power the synthesis process. This means that, as soon as gas prices begin to rise, fertiliser costs soon follow.

Europe has been dealing with a power crunch since early autumn, which is now further exacerbated by Russia’s invasion of Ukraine and the trade disruption resulting from EU sanctions.

Record-breaking gas prices have driven the cost of fertilisers up by 151% on an annual basis, putting producers and farmers under enormous financial strain.

“With gas now representing up to 90% of the variable costs in fertilizer production, the situation has become economically stressed for the fertiliser sector in Europe,” Jacob Hansen, director-general of Fertilizers Europe, an association that represents EU-based fertiliser manufacturers, told Euronews.

“The unprecedented high gas prices in Europe have made the production of ammonia and fertilizers at times uneconomical,” he added.

Watch the video explainer to know more about high food prices.