Industries are connected in strange ways that people don’t often think about until something goes awry. We’ve seen it happen with various shortages during the pandemic, and it’s happening right now with carbon dioxide.
Carbon dioxide is used in many ways in the food-and-drink industry. Carbonated beverages, alcoholic and nonalcoholic, are probably the most obvious application. Carbon dioxide is also used to freeze foods and process meat. Dry ice is carbon dioxide in solid form, and it’s used to keep food cold while in transit.
Where does food-grade carbon dioxide come from? Largely from energy and fertilizer production. Any time you burn a hydrocarbon, carbon dioxide is one of the products of the chemical reaction. And it’s also a byproduct of the production of ammonia, which is used in fertilizer.
The Wall Street Journal reports:
Supplies of carbon dioxide, a byproduct of industrial processes such as ethanol and fertilizer production, have been tight since early 2020, when many Americans stopped driving due to the Covid-19 pandemic, slashing ethanol demand. Now, shortages of the gas have grown acute in parts of the country, according to carbon-dioxide suppliers and food industry officials, as production disruptions coincided with strong summer demand. Maintenance shutdowns at industrial facilities that produce the gas this fall are expected to keep supplies tight.
Those maintenance shutdowns are a normal part of the seasonality of the fertilizer industry. Ammonia facilities do their maintenance in the fall, when farmers are mostly harvesting and not planting, because that’s when fertilizer demand is low. That usually works out okay because as temperatures cool, demand for carbon dioxide slows as well.
But this year, other factors have complicated the picture. Due to rising oil prices, one of the top U.S. suppliers of carbon dioxide began using the gas for enhanced oil recovery, a process that involves injecting carbon dioxide into the ground to push oil toward a well. That’s fine, except that the carbon dioxide used for that process is not as pure as carbon dioxide used in food. With less of the purer gas available, food-and-drink companies are facing a larger-than-expected shortage right now.
The Wall Street Journal reports that that issue has since been resolved, and customers are now receiving all the carbon dioxide they ordered, but there was a gap for a few weeks that will require some catch-up. Throughout the summer, major food companies such as Tyson, Kraft, General Mills, and Butterball were asking around for carbon-dioxide supplies, with Tyson saying in an email to suppliers from May, “We have a very big need and anything would be greatly appreciated,” according to the Journal.
FoodDive reports that some in the industry are looking at longer-term solutions:
How the industry will come through this is yet to be seen. Brad Dunn, executive vice president of industrial gas supplier CK Supply pointed out at an industry conference in April that U.S. carbon dioxide demand was equivalent to supply — about 10.3 million tonnes. But forecasts show that demand will grow 0.5% to 2% annually in the coming years, meaning 1,600 tonnes of additional daily supply will eventually be needed.
While natural sources and industrial byproducts may end up falling short in terms of supply (and imports may not be relied on — Europe is also seeing carbon dioxide shortages), other sources of the gas and the function it provides may be needed. The U.K.’s Royal Society of Chemistry suggested that nitrogen could be instead used for chilling, preservation and animal stunning.
In the long term, sophisticated carbon dioxide recapturing systems could capture the gas in the atmosphere and filter out impurities, the Royal Society of Chemistry says. Good Beer Hunting’s Sightlines reported that these systems are extremely expensive, take a lot of manpower to run and, when used in breweries, haven’t been able to produce all of the gas that is needed. However, since the trade journal reported some breweries are shutting plants and receiving quotes of $1.20 for a pound of carbon dioxide that once cost 11 cents, this solution may turn out to be a cost effective one.
Market economies are messy, but this is how they work. The division of labor allows for specialization in various fields, and then those fields trade with each other to create products. Imagine if every food company had to make its own carbon dioxide. Instead, they make food, and they buy carbon dioxide from other companies to whom the gas is a waste product. And when that arrangement stops working, they problem-solve for short-term fixes, and invent new processes or substitute different substances for long-term fixes.
How many politicians do you think could explain that carbon dioxide links fertilizer, energy, brewing, and meat processing? There’s probably a handful who know about it as it relates to major businesses in the districts they represent. But the importance of carbon dioxide behind the scenes in completely different industries is exactly the sort of thing that central planners are likely to miss when designing a national economic policy.