Higher Oil Prices Can Push Food Costs Up Fast

Oil prices don’t just hit the gas pump, they quietly rewrite the cost of daily life. When crude stays high, the shock moves through transport, industry, and global trade until it shows up as higher prices on the shelf, especially in food. We break down why the world is still a fossil-fuel society, even with renewables growing fast and EV adoption rising, and why oil remains the backbone of global mobility and freight logistics. 

We also dig into the numbers behind energy dependence and what they imply for resilience: consumption patterns across major economies, the limits suggested by proven reserves, and the reality that demand continues to grow as economies expand and electrification increases electricity needs. That combination keeps oil markets central to inflation risk and supply chain stability, making energy policy inseparable from everyday affordability. 

The most urgent thread is the food supply system. We connect oil and gas prices to fertilizer production, synthetic inputs, diesel-powered farming, processing, packaging, and long-distance shipping. We talk through how an oil and gas spike can become a fertilizer shortage, how chokepoints such as the Strait of Hormuz can amplify disruption, and why emerging economies that import fuel and fertilizer can take the hardest hit. If you want a clear, practical explanation of oil dependency, food security, and the mechanics of food price inflation, this conversation maps the chain reaction end to end. 

Subscribe to Chain Reaction, share the episode with a friend, and leave a review. What part of the food supply chain do you think is most vulnerable when energy prices surge?

Transcript

Welcome And What We Cover

SPEAKER_02 0:00

Chain Reaction, the number one podcast for Supply Chain Advantage, Global Trade and Policy with Tony Hines. Listen, learn, lead.

Tony Hines 0:13

Hello, Tony Hines here. You're listening to Chain Reaction, all about supply chain advantage, global trade and policy. Well, we're going to take a look at the impact of higher oil prices on the world population today. We're going to begin by looking at how dependent the world economy is on oil. And we're going to focus down and take a look, a deeper look, at the food supply system and what it might mean for food prices if oil prices remain high.

How Dependent The World Is

SPEAKER_02 0:47

Welcome to Chain Reaction.

Reserves, Demand, Slow Transition

Why Food Systems Need Fossil Fuels

How Oil Shocks Hit Food Prices

Inflation Risks And Closing Takeaways

Tony Hines 0:50

There are 8.3 billion people on the planet as of May 2026. And they're all affected by oil. We are, whether we like it or not, a fossil fuel society. The world population is still heavily reliant on oil, primarily because oil underpins transport, industry, and global energy systems. This reliance persists even as renewable energy grows. The evidence shows that oil is deeply embedded in global energy and economic systems. Fossil fuel supplies over 80% of all primary energy worldwide, and oil is a major component of the mix. Global oil consumption is about 102.6 million barrels per day, or about five barrels for every person a year. Oil is especially dominant in transport. Alternative fuels of course are EVs, hydrogen, biofuels. They're growing, but they are nowhere near globally dominant. It means that everything from food supply chains to global trade to personal mobility is all down to oil, and its availability and price. Cars, trucks, ships, planes overwhelmingly run on petroleum fuel. Even with EV growth, oil remains the backbone of the global mobility system. In industry, oil is used for petrochemicals to make plastics, solvents, fertilizers, lubricants, asphalt, industrial heat in some processes. For global supply chains, freight logistics and aviation rely on oil-based fuels, making oil central to global trade and food distribution. Oil is not used evenly throughout the world. The United States consumes 20.5 million barrels a day, it's the highest globally. Major economies such as China, India, Japan and Germany also consume large volumes. Per capita consumption is highest in wealthy industrialized nations, and the uneven distribution means some countries are far more oil dependent than others. The proven global reserves for oil are about 1.77 trillion barrels, and that's equivalent to forty seven years of supply at current consumption rates. That doesn't account for any new discoveries or demand changes. It means that oil runs out in forty-seven years, but it doesn't indicate that continued reliance without transition is unsustainable. The rate at which the world is transitioning away from oil is very slow. Renewables are growing, and they're growing rapidly for electricity generation. EV adoption is accelerating and already displacing some oil demand. However, global oil demand is still rising, especially in developing economies. The key thing is the world population is still reliant on oil because modern economies, transport systems and industrial processes are built around it. So even with that strong growth in renewables and electrification, oil remains a foundational energy source. And the other problem, of course, is that the demand for energy, including electricity, is growing. And it will grow further as we move to EVs and other electrical sources required for industry. So in some senses it's quite a depressing state that we're in. And forty-seven years isn't long, is it, if that's all the available supply of oil, and it's being wasted, burnt at a rapid pace. Food production is highly dependent on oil and other fossil fuels. Modern agriculture couldn't function at the current scale without them. The food systems use around 15% of all global fossil fuel demand. This includes everything from fertilizers for processing, packaging and transportation. Oil and gas are embedded in every stage of the supply chain. Agriculture consumes forty percent of all petrochemicals. This is mainly due to synthetic fertilizers, pesticides and plastic packaging. One third of all petrochemical production goes into nitrogen fertilizers. 99% of synthetic fertilizers and pesticides are fossil fuel derived. Fertilizer production is the biggest single fossil fuel use in agriculture. Nitrogen fertilizers ammonia, urea depend heavily on natural gas, which accounts for over 50% of production costs. When gas prices spike, fertilizer prices spike too, and food prices follow. Nearly half of all the world's population relies on crops grown with synthetic fertilizers. The United Nations estimates that about 50% of humanity depends on NPK fertilized crops for food security, and this is one of the clearest indicators of structural dependence. When it comes to transport, processing and packaging, they're all oil intensive. Food systems rely on diesel for tractors, harvesters and irrigation pumps, diesel and bunker fuel for global shipping, plastic packaging, 10% of all plastics go to food and beverage packaging, and coal chain logistics powered by fossil fuels. These links make food prices extremely sensitive to oil markets. When there's an oil price shock, it directly causes food price shocks. Back in 2022, the energy crisis after Russia's invasion of Ukraine disrupted ammonia production and drove fertilizer prices up sharply, which in turn pushed global food prices up and increased hunger risk. The tight coupling is repeatedly documented when oil rises, food price rises. So whether it's fertilizer production, farm operations, processing, packaging, transportation and the coal chain, they're all affected by oil and the oil price. So oil availability and oil prices determine the future when it comes to food. The bottom line is that modern food production is fundamentally oil dependent. Forty percent of all energy use is in food processing, and about 17% in fertilizer production. Livestock products consume 60% of total energy inputs, and they provide less than 20% of the calories that are needed. The agri food system uses about 30% of all global energy, and about 70% of that is used after the farm gate for transport, processing, packaging, and the coal chain. So oil prices are highly correlated with food production. Modern global agriculture is what people refer to as an energy sink. It's not an energy source. According to a PNAS Nexus study 2024, the energy return on energy investment for today's agri food system is about zero point nine one globally. That's based on a 2019 figure. Back in nineteen ninety five it was zero point six eight. So what does this mean? It means that the system uses more energy inputs, mostly fossil fuels, than the calorific value of energy it produces. There was a study in the early 1970s from the US agriculture system, which created one of today's myths that one calorie of oil produces about ten calories of food. And that's no longer the case. So now the pressure on food production from the oil system is much greater. So let's take a look at how high oil prices affect food production. The evidence shows a tight link between oil markets and agricultural output. Fertilizer shortages and price spikes occur when oil and gas prices rise. The near closure of the Strait of Hormuz in 2026 caused fertilizer supply disruptions and sharply higher prices, which directly threatens global food production. Fertilizer price increases may be the longest lasting impact of the energy shock, especially if natural gas infrastructure is damaged. This prolongs reduced yields and higher production costs. Transport and logistic costs rise quickly because diesel and bunker fuel are essential for moving foods. Higher diesel prices make shipping more expensive, raising the cost of agricultural inputs and distribution. Together these factors reduce farm profitability, constrain supply, and increase the cost of bringing food to market. Multiple sources have shown that food prices tend to move in tandem with oil prices. So as I said, it's highly correlated. Historical data from the Global Food Price Index and Brent Crude show strong co-movement when oil spikes, food prices typically rise, and this pattern was visible in the mid-2000s to 2008 and again in 2022. Oil is an input at multiple stages of the food system, whether it be farm machinery, fertilizer production, transport, refrigeration and processing and packaging. Higher energy costs pass through the supply chain and raise retail food prices. Companies often pass increased fuel and material costs straight on to consumers, and that contributes to broader inflation. It means sustained high oil prices don't just affect farmers, they raise the cost of living for households globally. There are wider economic consequences that reinforce food inflation. Higher oil prices create a negative supply shock, making production more expensive across the economy, and businesses may absorb some of that cost, but most is passed directly to the consumer, which means inflation. Emerging economies with fragile balance of payments positions are hit the hardest, especially those dependent on imported fertilizers and fuel. So we began our discussion today looking at how dependent the world population is on oil. And it is very dependent. And then we focused down to look at how it impacts the food production system and why we might be expecting higher prices in the stores, in retail stores this year for food products. And if we add that to the crisis in farming generally, where farmers are finding high fertilizer prices, changing the plans for particular crops, that shortage could be further exasperated.

SPEAKER_02 12:53

Welcome to Today Preaction with Tony Hines, the number one podcast all about supply chain advantage, global trade and policy.

Tony Hines 13:05

Well, that's it for today's episode. All about oil prices, how they affect the world population, and how that's likely to impact food production and prices later in the year. We do need an end to that choke point in the Strait of Hormuz as quickly as possible so that we can begin to bring down those oil prices and prevent food price inflation from hitting somewhere around 50% if it continues. We also need a longer-term solution. Stopping the war is the quick fix, but the longer term solution is to reduce oil dependency. And if oil's going to run out in the next 50 years or sooner, then that's going to be a major disruption, much bigger than we have today. Don't forget to subscribe to Chain Reaction. You'll be first to know when new episodes are out, and you'll never miss an episode. Bye for now.