Farmers Struggle As Energy Crisis Consumes Their Wallets

An energy crisis is squeezing American farmers — making it more expensive to operate their machinery, move their livestock and fertilize their fields.

The Iran war has disrupted global flows of crude oil, refined fuels and natural gas, driving up the cost of two key agricultural inputs: diesel and fertilizer. Farmers have limited ability to cut their use of either without potentially sacrificing yields or profits, an analyst told the Daily Caller News Foundation.

“Both the energy industry and the cultural industry are very low margins. Any increase in prices could be potentially devastating, especially in the smaller farms and refineries,” Chris Johnson, president of the American Energy Leadership Institute, told the DCNF.

The pressure can reach beyond the farm; energy prices can affect food prices by influencing the costs of processing, transporting and retailing food products, according to the U.S. Department of Agriculture.

The prospect of restricting U.S. diesel exports has also drawn concern from the refining industry and energy analysts. Republican Reps. Tim Burchett of Tennessee and Clay Fuller of Georgia introduced legislation in September that would temporarily prohibit diesel exports. A separate bill proposed by the same two lawmakers would trigger an export ban when average diesel prices remain above $5 per gallon for two weeks.

President Donald Trump also considered restricting diesel exports as his administration sought ways to bring down record fuel prices, though he said Oct. 2 that the U.S. would not impose a ban after G7 countries agreed to release emergency oil and diesel reserves.

“And so that’s why it’s both imperative that we get diesel prices down, but also why an export ban on diesel, like is being discussed by two members of Congress—I believe the President was talking about it this afternoon would be suicidal,” Johnson told the DCNF. “Because that just makes one low-margin industry slightly better off in a very short amount of time and heavily punishes the other small-margin industry, which is the downstream oil and gas refining industry.”

While restricting exports could temporarily leave more diesel in parts of the U.S., refiners could respond to the resulting surplus by cutting production, the Congressional Research Service found. Because refineries produce diesel alongside gasoline, jet fuel and other petroleum products, lower refinery runs could also reduce supplies of those fuels and potentially push their prices higher.

The American Petroleum Institute has similarly argued that Gulf Coast refineries produce more diesel than the region consumes and rely on exports to move the surplus. Blocking those exports could eventually fill available storage and force refiners to process less crude, reducing production of diesel as well as gasoline and jet fuel, according to the industry group.