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Of war, fertilizer, airlines and force majeure.

Transcript (AI-generated)

So let’s talk for a few minutes about fertilizer. Hi, I’m Paul Krugman. Fertilizer is not usually one of my things, but it’s important in what’s happening right now. And it’s also part of trying to understand just how big a mess we are in as a result of this unplanned, ill-conceived war.

So it’s Saturday, it’s three weeks and one day since the bombing began. Donald Trump is now, the story keeps changing, we’re either going to apply force and devastate Iran or our job is done and it’s up to other countries to reopen the Strait of Hormuz because we don’t rely on it, says the president, which is, first of all, it turns out not to be true. The United States does not import significant amounts of crude oil coming through the Strait of Hormuz, but we do import fertilizer, which I wasn’t aware of. Lots of things that are coming to light now that we’re facing the crisis.

The reason we are getting fertilizer, mostly from Qatar, is that the fertilizer is made, urea and some other things are made from natural gas. Natural gas can be exported, is exported, in large quantities from the Persian Gulf, or was until this war began. That’s expensive. You have to super cool it and liquefy it and ship it out through special terminals and special ships.

And, you know, it can be done and it’s become really critical to a large part of the world. But the other thing you can do with the natural gas that’s available in the Persian Gulf area is convert it into fertilizer, which is a lot easier to ship.

And so a lot of the world’s fertilizer turns out to come from that area and normally get shipped through the strait. And the United States, we’re a great agricultural nation, and we do import significant amounts of fertilizer. We import a large share of our fertilizer, and some of it from the Persian Gulf, a significant share of that.

So this is having a direct impact on U.S. farmers. The price of urea is way, way up. And there’s something that I’ve recently been alerted to, which is quite scary. The planting season is coming up, says somebody who has no idea what agricultural life is like, but that’s what I’m told.

And the farmers have long since contracted for their fertilizer. They’ve already paid or at least signed the contracts. The prices are locked in. But will there actually be fertilizer available? It’s not at all hard to imagine that the suppliers will declare force majeure, say there’s a war on, which is normally a valid excuse for backing out of contracts. and simply fail to supply the fertilizer. That would be a real catastrophe.

By the way, there are other places where that’s going to matter. The airlines quite often, you know, airlines cancel flights all the time, and sometimes they declare force majeure and cancel flights and don’t even compensate, although that I think is less of an issue right now. The price of jet fuel has risen. At last I checked 88% since the crisis began. Airlines, you know, they’re already talking about cutting back schedules, not about canceling. Well, it’s not entirely clear.

And, you know, I’m as insulated as anybody can get from all of this, but Robin and I do have some travels planned starting in late April. A mixture of pleasure and business, and some of it we really need to be in certain places, and it seems entirely possible that flights will be canceled. You know, we may or may not receive compensation, which I don’t really care about, but just not being able to get to the places that I have promised to be. would be a really serious disruption. Now this is trivial compared with farmers are facing potential financial ruin, but this is just an illustration of the disruptions.

And of course, at a fundamental lev