Oil and agriculture are connected through farm energy use, energy-intensive inputs such as nitrogen fertilizer, and biofuels made from crops and vegetable oils. Those channels can raise or lower costs and shift demand, but crude oil does not set food prices by itself: weather, fertilizer supply, crop yields, trade rules, currencies, consumer demand, and policy also matter.
How energy reaches farms and food supply chains
Farms use energy directly to plant, irrigate, harvest, cool, and dry products. Diesel and gasoline power machinery; electricity runs irrigation systems, refrigeration, and lighting; gas and liquefied petroleum gas can provide heat for buildings and grain drying. After harvest, energy is also used in food processing, storage, and transportation. The mix varies by farm, crop, climate, and supply chain.
As a historical U.S. benchmark, USDA Economic Research Service estimated that agriculture consumed 1,872 trillion Btu in 2016, about 1.9% of total U.S. primary energy consumption. Diesel made up 44% of direct farm energy use in that year; this is a share of direct energy, not of all energy embodied in farm inputs. These figures describe U.S. conditions in 2016, not current use or farms worldwide. USDA ERS’s 2018 summary of 2016 agricultural energy use
Why fertilizer links agriculture to natural gas
Energy costs reach farms even when a farmer is not buying fuel. Producing fertilizer and pesticides requires energy, and natural gas is a key feedstock and energy source for making ammonia, which is used to produce mineral nitrogen fertilizers. Fertilizer is not simply made from crude oil: the natural-gas connection is the important one for conventional ammonia production. Energy-price changes can also affect the cost of manufacturing other agricultural chemicals.
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The International Energy Agency reported in 2022 that ammonia production consumed around 170 billion cubic metres of natural gas, equivalent to 4% of global gas consumption. That figure concerns ammonia production, not fertilizer’s share of all global energy use. IEA’s 2022 account of energy and food-system pressures
USDA ERS describes energy-related inputs—including gasoline, diesel, electricity, and fertilizer—as over 30% of nonfarm-origin farm expenses. This is the agency’s contextual statement on its agriculture macroeconomics page, which has no publication date for that historical figure; it should not be read as a newly measured current share. Separately, the IEA said in 2022 that direct and non-direct energy costs could account for 40% to 50% of total variable cropping costs in advanced economies such as the United States, based on USDA 2022 Commodity Costs and Returns. The IEA’s combined category includes fertilizer, chemicals, fuel, lubricant, and electricity. The different measures have different scopes, so they are not interchangeable. USDA ERS on macroeconomics and agriculture
How biofuels connect crop markets to oil
Biofuels create a two-way link. Crops and vegetable oils can be used as fuel feedstocks, while biofuels can substitute for petroleum-based transport fuels. When fuel demand, prices, mandates, or subsidies increase demand for a feedstock, that can affect its market and the resources used to produce it.
The food-market effect depends on whether feedstock production competes with food production for land, water, fertilizer, labor, or transport and trade capacity. The degree of competition varies by crop, location, farming practices, yields, and policy; it is not a fixed consequence of biofuel production. Biofuels can also displace some petroleum demand, sending a feedback from agricultural markets back into transport-fuel markets. FAO on biofuels and household food security
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In its 2023 Renewables outlook, the IEA projected total biofuel demand to rise 23% to 200 billion litres by 2028. This is a forecast made in 2023, not a statement of current or observed demand. IEA’s 2023 transport-biofuels outlook
When higher energy prices affect farm costs and food prices
Higher fuel, electricity, or fertilizer costs can squeeze farm margins. A farmer may respond by changing input use, planting decisions, or output; if production falls, agricultural product prices may rise. The effect is not automatic: farmers’ ability to absorb or pass on costs depends on crop prices, contracts, available alternatives, and how quickly costs and production can adjust.
USDA ERS summarized the general direction this way: “Higher energy-related production costs would generally lower agricultural output, raise prices of agricultural products, and reduce farm income, regardless of the reason for the energy price increase.” The report also found that impacts on the farm sector were modest in the particular scenarios and periods it examined. It is a directional finding, not a forecast for every energy shock. USDA ERS, Impacts of Higher Energy Prices on Agriculture and Rural Economies (ERR-123, 2011)
Farm costs are only one part of what households pay for food. Processing, packaging, transport, retail operations, wages, inventories, and margins also contribute. As a result, there is no fixed percentage or guaranteed one-for-one pass-through from crude oil prices to grocery prices, and timing can differ across products and markets.
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Why oil is not the only driver of food prices
Energy prices can coincide with other shocks that influence food markets. In discussing the 2020–2022 food-price surge, the IEA pointed to recovering demand, adverse weather, trade restrictions, and soaring input costs. That episode should not be attributed to oil alone: several factors were acting at the same time. IEA’s 2022 discussion of the food-price surge
To understand a particular price change, consider the crop and its growing conditions, fertilizer availability and cost, trade and currency movements, consumer demand, and relevant fuel and biofuel policies alongside oil prices. The interaction differs by region and product; a U.S. estimate or a global forecast does not establish the effect on a specific local food market.
Who can gain or lose when costs and prices move
Higher agricultural output prices do not affect everyone in the same way. A farmer who sells more of a crop than the farm or household consumes may benefit from stronger selling prices, depending on the farm’s input costs. A livestock producer may face higher feed expenses. Households that buy more food than they produce can be hurt by rising food prices, especially where local market access, income, or trade policy limits their options. FAO’s discussion of biofuels and household food security emphasizes the distinction between net food producers and net consumers. FAO on biofuels and household food security
How to follow the connection without assuming oil tells the whole story
Oil and energy markets are useful signals, but they are not a standalone food-price forecast. To track the link, compare energy-market developments with agricultural input costs, crop and weather conditions, trade policy, and biofuel demand. For current oilcrops market bulletins and links to outlook material, FAO maintains an oilcrops markets and trade page. Its monitoring and outlook resources describe market conditions and projections; they do not imply a deterministic relationship between oil and food prices.
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