Preparing Australian Agriculture for Rising Energy Costs and Water Insecurity

Conventional agriculture has evolved to the assumption that oil and gas will always be cheap. Large amounts of energy are used in food production making agriculture the third largest energy consuming sector globally. Most people would be aware of the diesel fuel requirement to power the machinery used in crop production. What they would not be aware of is that diesel use is only a small component of the total energy demand in primary production. It is in fact through the manufacture of nitrogen fertilizers used to fuel crop growth where the largest energy liability accrues. To put it into visual perspective, it takes the energy from roughly one litre of oil to produce one kilogram of urea, the most widely used nitrogen fertilizer. To grow wheat in Australia, the energy equivalent from roughly 150 litres of crude oil per hectare is required just to account for nitrogen demand. Then of course there are the petrochemicals and energy required for herbicide and pesticide manufacture.


Agriculture in the future will continue to incur fertilizer, pesticide and fuel cost increases at the very least proportional to rises in oil and gas prices. Since October 2006 and for the first time in history, fertilizer prices are actually appreciating at a significantly faster rate than fossil fuel prices. This is occurring largely as biofuel demand ratchets up cereal grain prices and hence is creating massive global fertilizer demand. As hydrocarbon prices resume their long term inflationary trend, nitrogen fertilizer prices have the very real potential to hyperinflate to price rationing levels.Rising fertilizer costs have another less obvious consequence. That being increasingly more arable broadacre farmland throughout the world becomes