It happened to potash. It can happen to oil.
Last week marked the collapse of one of the last remaining cartels in the world economy—the potash cartel. Potash is a critical ingredient in the production of the fertilizers that help grow our food. For decades, the global potash industry has been dominated by Belarusian Potash Company (BPC), a joint venture between the Belarusian Belaruskali and the Russian Uralkali, together producing about a third of the world’s potash supply. On July 30th Uralkali broke away from BPC and directed its exports to China, consumer of one fifth of the world’s supply, via its own distribution channels. The announcement rocked the potash industry. Potash miners worldwide lost a third of their share value, and the commodity’s price is projected to slump by thirty percent. The breakup of the potash cartel should soon translate into lower fertilizer prices, which should in turn lower wholesale food prices. But as a new World Bank report confirms, the biggest contributor to increases in food prices over the last several years was neither the price of potash nor, as many still mistakenly believe, demand for biofuels, but rather the price of oil. Oil products go into every part of our food supply chain, from packing materials to fuel for the agricultural machinery and the trucks, planes and ships that transport food products from farm to plate. So when crude-oil prices rise, as is the case now, we pay more for our food. While the price of potash is no longer set by a cartel, the price of crude still is.
