Natural Gas: Domestic Nitrogen Fertilizer Production Depends on Natural Gas Availability and Prices

Natural gas is the most costly component used in manufacturing nitrogen fertilizer. Therefore, when natural gas prices increased in 2000-2001, U.S. companies that produce nitrogen fertilizer reported adverse financial consequences resulting from much higher production costs. Concerns also arose that the nation's farmers would face much higher nitrogen fertilizer prices and that there might not be an adequate supply of nitrogen fertilizer to satisfy farmers' demands at any price. Responding to congressional concerns, GAO undertook a study to determine (1) how the price of natural gas affects the price, production, and availability of nitrogen fertilizer and (2) what role the federal government plays in mitigating the impact of natural gas prices on the U.S. fertilizer market.