Novak: High gas prices may raise prices for agricultural products

MOSCOW, Oct 20 (PRIME) -- The situation on the natural gas market is tough and leads to suspension of output in many related industries, including production of fertilizers triggering higher prices and the risk of food inflation, Deputy Prime Minister Alexander Novak said on Wednesday.

“As a result of the price growth and contraction of production of fertilizers in general, we see the risk of a new upward spiral in the prices for agricultural products. The market evaluates the current situation in this way now,” Novak said during a government meeting chaired by President Vladimir Putin.

The troubles of the international gas market resulted in a significant contraction of nitrogen fertilizers production and suspension of capacities of the petroleum and gas chemical industry. The prices for nitrogen fertilizers in Europe jumped by around 100% as about 40–50% of production has been suspended, he said.

The international gas prices have jumped by about 250% since the beginning of 2021, the coal prices quadrupled to U.S. $160–200 per tonne, and the power prices skyrocketed by about 500%. The dire situation on the E.U. energy market is very unlikely to subside and vanish soon, he said.

Putin said that the government has to develop measures that would protect agricultural producers and restrict the food price growth. As soon as the prices for fertilizers that are based on gas start growing, producers will be tempted to transfer the costs to the consumer prices, which should be prevented, he said.

Russia is not interested in the increase of prices for gas in Europe.

“This will have consequences for us, and I don’t mean the energy sector. If there is a decrease in consumption, and this situation will ultimately lead to this decrease, it will have an impact on our producing companies in general and on Gazprom in particular, that is why we are not interested in constant price growth for energy resources and gas,” he said.

There are deeper reasons for the situation besides contraction of nuclear power generation and coal-burning power generation, connected to wider budget deficits, disruptions in the supply chains of goods, and higher inflation in the leading economies. The European governments are creating measures to support the people, but it will only maintain household consumption, while industrial consumption will contract further, which will ultimately hit the consumer, he said.

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