Gas and diesel prices have soared since the start of the Iran war, but the situation could get even worse later this year because of ethanol requirements and problems with fertilizer supply chains.

To help keep a lid on prices at the pump, just days ago, the Environmental Protection Agency waived the summertime cap on the amount of ethanol blended into gasoline. It’s a Band-Aid designed to stretch the nation’s fuel supply by diluting it with more ethanol, up to 15%.

However, ethanol prices are poised to rise significantly later this year and take gasoline with it. To understand why, it’s important to know from where ethanol comes in the first place. The supply chain doesn’t start on a farm, but in the Middle East.

About one-fifth of the world’s oil and natural gas supply has been disrupted by the closure of the Strait of Hormuz, causing energy prices to skyrocket. Equally important, but garnering less attention, have been the price increases for products made from energy, like nitrogen-heavy fertilizer, which is synthesized from ammonia, derived from natural gas.

Many of those fertilizer prices have exploded 40% or more in just a couple weeks, and at the worst time possible—right when farmers are about to buy before the growing season. Particularly hard hit is America’s staple crop, corn, due to its voracious appetite for nitrogen. Corn is also the backbone of the country’s ethanol industry.

The crop requires significant amounts of nitrogen fertilizer, more than just about anything else grown in America, with application rates of 150 pounds or more per acre. Irrigated corn regularly has application rates above 200 pounds per acre.

Between corn’s high demand for nitrogen and the large amount of acreage devoted to it in the U.S., corn accounts for almost four-fifths of all nitrogen fertilizer used on American farms.

For context, wheat is the next biggest nitrogen consumer in the U.S., but has application rates roughly one-third that of corn. Cotton is lower still. Then there are crops like soybeans that pull so much nitrogen from the air that they often don’t need any applied to the soil.

This means that changes in fertilizer prices affect different crop prices unequally, with corn being disproportionately impacted. Consequently, corn products like ethanol are surprisingly dependent on energy prices.

Fertilizer prices have jumped not only because of lost natural gas exports from the Middle East, but also fertilizer exports from the region too. Anticipating global shortages, both Russia and China have already instituted export bans of certain fertilizers to help ensure ample domestic supplies.

So, in addition to fertilizer inputs becoming more expensive, there is also less fertilizer available globally, putting further upward pressure on prices for the commodity and sending another ominous signal: lower crop yields. The lower availability of fertilizer means lower application rates in aggregate, which means lower crop yields. That, in turn, points to even higher corn prices later this year due to reduced supply.

But just as the EPA waived the cap for on the amount of ethanol blended into gasoline, it can also waive the minimum by suspending the Renewable Fuel Standard (RFS), thus eliminating the requirement to blend increasingly expensive ethanol into gasoline.

This isn’t unprecedented. The EPA has previously waived blending requirements in previous emergencies, like after hurricanes or supply chain disruptions, to give refineries the most flexibility to deliver a cheaper product to consumers.

This wouldn’t just reduce prices at the pump. It would also help put downward pressure on prices for many consumer staples at the grocery store. Suspending the RFS will significantly reduce the demand for corn as a biofuel, incentivizing farmers to either sell more corn as animal feed or plant other crops instead.

Planting more of other crops will increase their supply and reduce prices for consumers. Likewise, increasing the supply of animal feed will reduce a major input cost for meats and thereby put downward pressure on meat prices too. Consumers will see relief both at the pump and the grocery store.

After four years of sky-high inflation, American families can ill afford another round of higher food prices, but that’s exactly what’s coming if things remain unchanged. Even if the Iran war wraps up in the next few days, and energy prices eventually come back down, the damage has already been done in terms of fertilizer supply chains and their components’ prices.

With so much already backed into the cake due to the spike in energy prices over the last month, suspending the RFS is one of the few things that can still make a positive difference for consumers.

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E.J. Antoni is chief economist and the Richard Aster fellow at the Heritage Foundation and a senior fellow at Unleash Prosperity.

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