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THE SEED OF THE ENERGY CRISIS LIES IN TOMATOES Economists miss the fact that gas prices
affect everything, not just fuel bills
Ed Conway, Sunday Times (London), 11 September 2022
Every time I need a reminder of how utterly entangled our lives are with natural gas, my
mind turns instantly to tomatoes. This will doubtless sound a little odd. For most people,
natural gas is all about heat and power, about those bills the government has just committed
to cap, at extraordinary expense. And yes, this is all incredibly important and we'll get to it in
a moment, but please: indulge me for a moment by thinking of a glistening, ripe, cherry
tomato.
If it was bought from a supermarket the chances are that this tomato was grown in an
enormous greenhouse. Most of our domestic crop comes from these surreal places: wide,
cavernous halls of glass with rows of tomato vines - and for that matter cucumbers and
peppers - sprouting from hydroponic substrate, stretching in lines as far as the eye can see.
The roots are drenched in water and nitrogen- rich fertiliser; the air is kept at just over 20C
and artificially enriched with carbon dioxide, about double the concentration outside. In the
most advanced greenhouses in the Netherlands there are lamps that flick on during cloudy
days or in the winter.
The upshot of all of this that the tomatoes photosynthesise and hence grow at an
extraordinary clip. A single acre in these greenhouses can yield 400 times that of a typical
field. There are other benefits: growing with hydroponics means you can be more forensic
with your fertiliser. These places use far fewer chemicals than traditional farms. And more
tomatoes per acre means a lower price in the supermarket. In the decade between 2010 and
2020 the price of the average British tomato barely budged.
What on earth has all this got to do with natural gas? Only everything. Nearly all the world's
nitrogen- based fertiliser is made from natural gas: we use methane to "fix" the nitrogen
from the air. The boilers keeping the greenhouses warm are almost all fuelled by natural gas.
And the CO2 being pumped in to aid photosynthesis is captured from the boiler's flue. The
tomato is quite literally a fossil fuel product.
When economists glance at the "basket" of goods whose prices are collected and aggregated
into the official inflation data, they are often struck by how little of it is formally categorised
as "energy". The other week a Financial Times columnist remarked that "energy prices
account for 10 per cent" of inflation. He had totted up things such as electricity bills and
petrol prices. But, I found myself shouting at the newspaper, what about tomatoes?
Tomatoes are also energy products - as for that matter are peppers and aubergines and
anything else grown with fertilisers and transported in trucks. And tomato inflation, it turns
out, is running at 20 per cent - even higher than the headline rate.
,I'm quite serious about this. I have a suspicion that part of the reason economists at the FT
and for that matter the Bank of England missed the recent build-up of inflation (which pre-
dated the Ukraine war by many months) is that they didn't spend enough time pondering
tomatoes. They failed to understand that energy costs are not just a sub-category of
inflation, they are everywhere: in food prices, product prices, services prices. They also failed
to notice the bug at the very heart of conventional economics, which blithely presumes that
if the price of something goes up, people can just buy an alternative product. Tomatoes too
expensive? Just buy a different vegetable. Fine. But you can't really substitute for energy:
you go cold or you do nothing.
All of which is why we were heading for such an economic cliff-edge until last week's
intervention. It also helps explain why even an instinctive libertarian used her first piece of
legislation to fix prices. There are no free-marketeers in an energy crisis. Liz Truss's energy
guarantee, as she called it, is a very big deal indeed. It might even prevent a recession, just
about. But that success will come at a price. Quite what that price is no one can tell you. The
Treasury didn't even bother trying, which infuriated the City's economists but is in some
senses more honest than attempting to put a number
on it.
Perhaps we're talking £100 billion, perhaps more; probably the biggest peacetime splurge in modern
history... but frankly no one has the foggiest because it all depends on what Vladimir Putin does next.
Some Russian gas is still flowing to Europe at the moment, mostly via Ukrainian pipelines (the irony!)
but how soon until Russia confects an excuse to cut that supply off, doubtless blaming it on
Volodymyr Zelensky? So the price could go higher still. However, beyond the cost and lack of detail
about how it will work, there are at least two other problems with Truss's intervention. The first is
that it assumes that this will all be over in a couple of years. Yet look at the timeline of forthcoming
global gas projects and it's clear that the hole left in European markets by Russian gas will not be
filled until the second half of this decade. There is a good chance, in other words, that what looks
today like a very expensive subsidy could soon turn so costly that it could threaten the solvency of
the nation. Don't panic: we are nowhere near that yet, but it's enough of a prospect that investors
are getting a wee bit nervous. The other problem is that the energy guarantee failed to ask the most
obvious question: since Russia benefits from high energy prices and since we use so much energy,
might it not be prudent to think how we could use a bit less of it in future? Back to those tomato
farmers. They are having a terrible time of it; half the glasshouses in northern Europe are empty
because growers can't afford the gas. Truss's measures might make it just about affordable to switch
the boilers back on, but there's another model, which draws inspiration from the pandemic. In much
the same way as we paid people then to stay at home, this time around shouldn't we be paying
businesses not to burn gas? Sure, cherry tomatoes may be harder to come by for a few years, but a
less colourful salad is surely a small price to pay for a policy that might hit Putin where it hurts: smack
bang in the gas price. The final lesson to draw from tomatoes is a deeper one. If we are going to
reduce our carbon emissions and get to the much-vaunted net zero, something Truss recommitted
herself to last week, it won't just come about by replacing our gas boilers with heat pumps and our
power stations with wind turbines. We'll have to come up with new ways to make fertilisers without
natural gas (and without cannibalising the world's electricity). We'll have to try to disentangle the
million different ways we are reliant on fossil fuels. We'll have to reimagine nearly every corner of
industry. In the great energy transition, tomatoes are a mere appetiser. on it. Perhaps we're talking
£100 billion, perhaps more; probably the biggest peacetime splurge in modern history... but frankly
no one has the foggiest because it all depends on what Vladimir Putin does next. Some Russian gas is
still flowing to Europe at the moment, mostly via Ukrainian pipelines (the irony!) but how soon until
Russia confects an excuse to cut that supply off, doubtless blaming it on Volodymyr Zelensky? So the
,price could go higher still. However, beyond the cost and lack of detail about how it will work, there
are at least two other problems with Truss's intervention. The first is that it assumes that this will all
be over in a couple of years. Yet look at the timeline of forthcoming global gas projects and it's clear
that the hole left in European markets by Russian gas will not be filled until the second half of this
decade. There is a good chance, in other words, that what looks today like a very expensive subsidy
could soon turn so costly that it could threaten the solvency of the nation. Don't panic: we are
nowhere near that yet, but it's enough of a prospect that investors are getting a wee bit nervous. The
other problem is that the energy guarantee failed to ask the most obvious question: since Russia
benefits from high energy prices and since we use so much energy, might it not be prudent to think
how we could use a bit less of it in future? Back to those tomato farmers. They are having a terrible
time of it; half the glasshouses in northern Europe are empty because growers can't afford the gas.
Truss's measures might make it just about affordable to switch the boilers back on, but there's
another model, which draws inspiration from the pandemic. In much the same way as we paid
people then to stay at home, this time around shouldn't we be paying businesses not to burn gas?
Sure, cherry tomatoes may be harder to come by for a few years, but a less colourful salad is surely a
small price to pay for a policy that might hit Putin where it hurts: smack bang in the gas price. The
final lesson to draw from tomatoes is a deeper one. If we are going to reduce our carbon emissions
and get to the much-vaunted net zero, something Truss recommitted herself to last week, it won't
just come about by replacing our gas boilers with heat pumps and our power stations with wind
turbines. We'll have to come up with new ways to make fertilisers without natural gas (and without
cannibalising the world's electricity). We'll have to try to disentangle the million different ways we
are reliant on fossil fuels. We'll have to reimagine nearly every corner of industry. In the great energy
transition, tomatoes are a mere appetiser.
The text presents several arguments regarding the relationship between
natural gas and the production of tomatoes, as well as the impact of
energy prices on inflation and the economy as a whole. Some of the
arguments presented in the text include:
1. The production of tomatoes, peppers, and other crops in
greenhouses relies heavily on natural gas for heating and fertilizer
production, making these products indirectly linked to energy prices.
2. The use of hydroponic technology in greenhouses results in greater
yields and lower chemical use, but also relies on natural gas-derived
fertilizers and energy for heating and CO2 supply.
3. Energy costs are not just a sub-category of inflation but are present
in food prices, product prices, and service prices. Rising energy costs
can have a significant impact on inflation and the economy.
4. The conventional economic theory of substitution is limited when it
comes to energy products since people cannot easily switch to
alternatives if the price of energy products goes up.
5. Liz Truss's energy guarantee, which aims to cap energy prices, is a
significant intervention that may help prevent a recession but could
come at a high cost, with uncertain implications for the economy
and investors.
6. Rather than relying solely on price controls, it may be important to
consider ways to reduce energy consumption and dependence on
fossil fuels to mitigate the impact of energy price fluctuations.
, Primary purpose:
Explain the hidden costs of natural gas on food production and how it’ slinked to
the issue of inflation.
Central idea:
The central idea of the text is the impact of natural gas on the global economy
and the challenges posed by the current energy crisis caused by geopolitical
tensions and the dependence on fossil fuels. The author highlights how natural
gas is used in greenhouse agriculture and the production of nitrogen-based
fertilizers, as well as in heating and electricity generation. The author also
discusses the impact of rising energy prices on inflation and the difficulty of
substituting energy with alternatives. Finally, the author examines the recent
intervention of the UK government to cap energy prices and the potential risks
and limitations of this policy.
Author’s attitude:
The author is trying to highlight the importance of natural gas in our lives by
discussing the unexpected relationship between natural gas and tomatoes. The
author argues that natural gas is used in various aspects of tomato cultivation,
such as heating the greenhouses, producing nitrogen-based fertilizers, and
capturing CO2 from the boiler's flue. The author also claims that economists and
policymakers often overlook the impact of energy prices on inflation and the
broader economy, leading to the failure to notice the recent build-up of inflation.
The author believes that there are no free-market solutions to an energy crisis,
and the recent intervention by Liz Truss to fix energy prices is a significant step
to prevent an economic recession. However, the author also warns that the long-
term solution to the energy crisis should involve reducing energy consumption
rather than relying solely on energy subsidies.
Resume:
The article discusses the role of natural gas in the production of tomatoes and
other food products grown in large greenhouses. Natural gas is used to power the
boilers that keep the greenhouses warm, and it is also used to make the
nitrogen-based fertilizer that is essential for the growth of these crops. As a
result, the prices of these crops are affected by the cost of natural gas. The
article argues that economists have failed to fully appreciate the impact of
energy prices on inflation and the economy in general. It also discusses recent
government intervention to cap energy prices, which could have significant
economic consequences in the future. The article suggests that it may be
necessary to consider ways of reducing energy consumption in the long term to
avoid similar problems in the future.
READING TEXT 2
