Oil Prices Are Not the Only Costs Rising

As prior posts have noted, the Felon and his band of would be Rambo's seemingly gave little thought to and even less planning for the impacts the Felon's war of choice against Iran would have on both the USA and the global economy.  Adding to the planning debacle is the fact that the Felon's "Secretary of War" fired large numbers of members of the military command he deemed "too woke" - including roughly 160 experienced individuals tasked with making sure civilian deaths are minimized - who might have cautioned about what would flow from a sustained attack on Iran.  Now, the world finds the Straight of Hormuz essentially closed to shipping and oil prices surging - something competent planning would have factored in - even as the Felon has directed assaults on Iran's main oil terminal and Iran promises to keep the Strait of Hormuz closed. As a lengthy piece in Politico lays out, the price surges will not be limited to oil and gas but will also impact everything from fertilizer needed by America's already struggling farmers to semiconductors.  With perhaps a majority of American voters concerned about affordability - something the Felon calls a "hoax" - the Felon's war of choice will only exacerbate rising consumer costs. Yes, the military has performed well, but the negative economic impact may only be beginning. Here are article highlights:

The war with Iran is driving up more than gasoline prices. It is beginning to hit semiconductors, medical imaging, backyard gardens and even children’s party balloons.

While much of the world is focused on how Iran’s essential closure of the Strait of Hormuz is damaging global energy markets, other key industries risk getting hit by similar price inflation. That’s because Hormuz is also a major shipping route for helium and fertilizer, which both affect a wide sector of the economy and are now experiencing price spikes as ships bottleneck on both sides of the strait.

“The longer it goes on, the more serious it’s going to get,” said Rich Gottwald, CEO of the Compressed Gas Association.The expected price icreases come as the Trump administration attempts to assuage voters’ concerns over cost-of-living, and Republicans worry that the war’s ripple effects will hamstring their prospects in November.

Iran has now effectively blocked ships from crossing the strait, through which 20 percent of the world’s daily oil and natural gas supply travels, inflicting pain on global energy markets by driving the price of crude to roughly $100 a barrel. Iran’s new leader, Ayatollah Mojtaba Khamenei, indicated Thursday that won’t change soon, pledging that “the lever of blocking the Strait of Hormuz must also continue to be used.”

About a third of both the global helium and fertilizer supply passes through Hormuz. Half of the global supply of urea – a nitrogen-based fertilizer– and almost a third of the ammonia supply run through the straits, according to the American Farm Bureau Federation.

Prices are already spiking since global supplies are taking a hit right as many agricultural producers are beginning their Spring plants. Urea prices have jumped 30 percent since the Trump administration began bombing Iran, according to the Fertilizer Institute.

Meanwhile, helium spot prices have doubled since the war began, said Anish Kapadia, CEO of market research firm AKAP Energy. Qatar’s state-run energy firm halted liquified natural gas production in the first days of the war and it is estimated it will take months to get it back up and running. The nation is a major producer of helium, which is a byproduct of liquefied natural gas production.

Semiconductor manufacturers heavily rely on helium to prevent certain chemical reactions in production, Gottwald said. MRIs also need helium to cool the magnets the machines need to function. Welding is also heavily reliant on helium. Meanwhile, party balloons account for about 10 to 20 percent of the market.

Interruptions or price spikes to semiconductor manufacturing could hit global markets for everything from computers to smartphones to vehicles to medical equipment.

“A lot of the world doesn’t run without semiconductors and you can’t make semiconductors without helium, period,” Gottwald said. “That will probably add pressure from a political perspective from all different countries around the world.”

The losses are already beginning to mount.  Pressure on the helium market won’t deflate for months because Qatar’s natural gas production facilities were damaged in the fighting, said Anish Kapadia, CEO of market research firm AKAP Energy. After the strait is reopened, he said, it would then take a while to put back into place specialized transportation containers, which are chilled to a temperature close to zero Kelvin, roughly negative-460 degrees Fahrenheit. So, even if the Strait of Hormuz were to reopen today, it would take two months for the market to return to normal, he said.

The U.S. is the world’s leading supplier of helium, followed by Qatar. But, like any other commodity sold on the global market, the price of domestic supplies will jump as shortages ripple through the international supply. . . . . If the shutdown lasts for two months, he expects “broader stress” and an increase of 25 to 50 percent.

“If the disruption stretches to three months, I would expect genuine shortages outside the best-buffered regions, especially in parts of Europe and Asia,” which are particularly reliant on Qatar’s supply. The majority of semiconductor manufacturing takes place in Asia.

Fertilizer demand in the U.S. is hitting just as the spring planting season begins.  The squeeze is hitting farmers on two fronts, with rising diesel fuel and fertilizer costs, American Farm Bureau Federation President Zippy Duvall wrote in a letter to Trump this week. He noted that the cost increase could drive inflationary pressure on the U.S. economy while also threatening national security if fertilizer shortages cut production and drastically raised food prices.

“These supply chain shocks are expected to drive already record-high input prices even higher at a time when farm margins are already extremely tight and many farmers are underwater,” he wrote.

While the U.S. produces some types of fertilizer, other countries are heavily reliant on imports, particularly during seasonal demand peaks. For instance, 97 percent of potassium used in the U.S. is imported, as well as 18 percent of nitrogen and 13 percent of phosphate, according to AFBF. The crops that rely heavily on spring fertilizer applications include corn, cotton and wheat.

“We are deeply concerned that failure to act could lead to disruptions to the food supply chain not seen since 2022 when food price inflation reached 40- year highs,” Duvall warned. This time, without the strait fully open, there are few signs of relief.

“Storage fills, plants shut down, and the product simply does not reach the global market,” the center noted. “This is a harder form of supply disruption with no workaround.”

The irony will be that if prices surge at home, the Felon may have set the stage for Republican election losses in November.  Of course, all of this would have been thought through by a competent administration - something America clearly does not have currently.