Surging oil and shipping costs raise fuel, input and food price risks for agriculture
Crude oil topped $110 a barrel and U.S. pump prices have risen, pushing diesel and shipping costs higher and raising the prospect of increased agricultural input and food prices.
Crude oil prices topped $110 a barrel on Monday, levels not seen since 2022, and U.S. pump prices have risen in response. The U.S. average for regular gasoline was $3.48 per gallon on Monday, up from $2.98 before the war began. California’s average reached $5.20 per gallon while Louisiana averaged $3.04 per gallon.
Diesel in the United States climbed to $4.65 per gallon, a 23% increase since the start of the conflict. Higher diesel costs directly raise operating expenses for tractors, harvesters, and transport fleets across farming supply chains.
The potential closure of the Strait of Hormuz is tightening global energy and shipping markets. The strait carries about one-fifth of the world’s crude oil and liquefied natural gas (LNG). Shipping fuel price increases matter for agriculture because fuel can represent 50% to 60% of total operating costs for shipping, pushing up the cost of moving fertilizers, seeds, animal feed, and finished food products.
Europe’s benchmark natural gas has surged roughly 75% since the war began, and analysts warn prolonged higher energy prices could feed into broader inflation. JPMorgan economists estimate U.S. inflation could rise to around 3% or higher in coming months, with monthly inflation from rising gas prices potentially as high as 1% in March.
Rising oil and energy costs have direct agricultural implications. Higher fuel prices increase field operation and transportation costs. Elevated energy prices also raise fertilizer production costs and can boost demand for vegetable oils as fuel substitutes, tightening supplies available for food use.
Consumer food prices will be affected unevenly. Items requiring rapid transport and energy-intensive processing—such as fresh produce, dairy, and other perishable goods—may see price increases sooner than non-perishable packaged foods, where transport is a smaller share of total cost.
U.S. households reportedly spend about $2,500 a year filling their gas tanks. Even modest weekly increases—about $10—could squeeze household budgets and reduce discretionary spending, with potential knock-on effects for grocery purchasing patterns.
Retailers and shippers may absorb some higher transportation costs in the short term, especially if the conflict proves brief, but those costs are likely to be passed to consumers if elevated energy prices persist. Italian Finance Minister Giancarlo Giorgetti has urged caution in transmitting higher energy costs to consumers.
The reporting compiles analysis and commentary from economists and industry analysts and is attributed to Associated Press business writers Cathy Bussewitz, Mae Anderson, and Chris Rugaber, with reporting from multiple bureaus and editors.