How Rising Oil Prices Drive Up the Cost of Food
The link between crude oil prices and food prices is more direct — and more complex — than most people realise. From fertiliser to freight, oil is embedded in every stage of the global food supply chain.
Oil Is in Everything We Eat
When oil prices rise sharply, the effects ripple through the global economy in ways that are sometimes invisible until they show up on supermarket shelves. The connection between crude oil and food prices is not a simple one-to-one relationship — it operates through multiple channels, each with its own timing and magnitude. Understanding these channels is essential to understanding why the 2026 Iran conflict has triggered food security warnings in dozens of countries.
The most direct channel is transport fuel. Every stage of the modern food supply chain depends on diesel: tractors ploughing fields, trucks carrying grain to ports, container ships crossing oceans, refrigerated lorries delivering produce to distribution centres, and vans making last-mile deliveries to supermarkets. When diesel prices rise — as they have sharply in 2026 — every one of these costs increases, and those increases are eventually passed on to consumers.
The Fertiliser Connection
The most significant and least-understood link between oil prices and food costs is fertiliser. Nitrogen-based fertilisers — particularly urea and ammonium nitrate — are manufactured from natural gas through the Haber-Bosch process. Natural gas accounts for approximately 70 to 90 percent of the production cost of nitrogen fertiliser.
When natural gas prices spike (as they have during the 2026 Hormuz disruption, given Qatar's LNG export constraints), fertiliser prices follow almost immediately. This is not a minor cost item for farmers: nitrogen fertiliser is the single largest input cost for most grain crops. A doubling of fertiliser prices can reduce farm profitability by 30 to 50 percent, forcing farmers to either absorb the loss or reduce application rates — which in turn reduces crop yields.
The 2021–2022 energy crisis provided a preview of this dynamic. When European natural gas prices surged following Russia's invasion of Ukraine, several European fertiliser plants shut down because production was no longer economical. Global urea prices more than tripled in 2021, and the effects were felt in food prices throughout 2022 and 2023. The 2026 crisis is following a similar trajectory, with the added complication that Middle Eastern natural gas — a major feedstock for fertiliser production — is directly affected by the Hormuz disruption.
The Oil-to-Food Price Transmission Chain
Shipping and the Global Food Trade
Modern food security depends on global trade. Countries that cannot grow enough food domestically — which includes most of the world's most populous nations — rely on international grain markets to fill the gap. The world's major grain exporters (the United States, Brazil, Argentina, Australia, Ukraine, and Russia) ship their production to deficit countries via bulk carrier vessels.
When shipping costs rise — as they do when oil prices increase and when tanker routes are disrupted — the cost of imported food rises proportionally. For wealthy countries, this translates into higher supermarket prices. For low-income countries that spend a large proportion of household income on food, it can translate into food insecurity and, in extreme cases, famine.
The 2026 Hormuz disruption has affected food shipping in two ways. First, higher bunker fuel costs (the heavy fuel oil used by cargo ships) have increased shipping costs across all routes. Second, vessels rerouting around the Cape of Good Hope to avoid the strait are adding 10 to 14 days to transit times, which effectively reduces the capacity of the global shipping fleet and drives up freight rates.
Which Countries Are Most Vulnerable?
The countries most vulnerable to oil-driven food price increases share several characteristics: high food import dependency, low domestic fuel production, limited foreign exchange reserves, and existing food insecurity. These factors combine to create a situation where an external oil price shock can rapidly translate into a domestic food crisis.
Sub-Saharan African countries are particularly exposed. Many import the majority of their food staples (wheat, rice, cooking oil) and have limited ability to absorb higher import costs. Countries in the Sahel region — already experiencing food insecurity due to conflict and climate variability — face the most acute risk.
South Asian countries including Bangladesh, Pakistan, and Sri Lanka are also highly exposed. These countries have large populations, high food import dependency, and limited strategic reserves. The 2022 Sri Lankan economic crisis — partly triggered by fuel and food price shocks — demonstrated how quickly oil-driven inflation can destabilise a national economy.
Middle Eastern and North African countries face a particular irony: many are oil producers, but they are also large food importers. Egypt, the world's largest wheat importer, is highly exposed to any disruption in global grain trade. The combination of higher import costs and reduced domestic purchasing power (if oil revenues decline due to the conflict) creates a complex vulnerability.
The Biofuel Complication
A further complication in the oil-food price relationship is biofuels. In the United States, Europe, and Brazil, significant quantities of food crops — particularly corn, sugarcane, and vegetable oils — are converted into ethanol and biodiesel. When oil prices rise, biofuel production becomes more profitable, which draws more agricultural land and crop production away from food uses and toward fuel production.
This "food-versus-fuel" competition is most acute in the corn ethanol market. The United States converts approximately 40 percent of its corn crop into ethanol. When oil prices are high, the economic incentive to produce more ethanol increases, which can tighten corn supplies and push up food prices globally — since corn is a key ingredient in livestock feed and processed food products worldwide.
What Governments Can Do
Governments have several tools available to mitigate the food price impact of an oil price shock. Strategic grain reserves — analogous to strategic petroleum reserves — can be released to stabilise domestic food prices. Export restrictions can prevent domestic food supplies from being diverted to higher-priced international markets (though these measures, when applied by major exporters, can worsen the situation for importing countries).
Fuel subsidies can protect farmers and food distributors from the full impact of higher diesel prices, though they are expensive and can distort markets. Targeted food assistance programmes can protect the most vulnerable households from the worst effects of price increases.
In the longer term, reducing dependence on fossil fuel-based fertilisers — through the development of green ammonia production using renewable energy — would sever the direct link between natural gas prices and fertiliser costs. Several large-scale green ammonia projects are under development, but they will not be commercially significant for several years.
Monitoring the Crisis
OilCrisisTracker.com monitors the food security impact of the 2026 energy crisis through the country-level data on each nation's page, including fuel reserve levels, food security risk scores, and the estimated impact of current oil prices on retail food costs. The Global Crisis Severity Index incorporates food security as one of its five sub-components, reflecting the importance of this dimension to the overall assessment of the crisis.
