In yet another supply chain shortage, the U.K. is running low on food-grade CO2. As the nation's officials scramble to come up with solutions, Britains face the possibility of encountering slim grocery shelves.
As for why there's a CO2 shortage, it has to do with the high cost of fuel, which most of the globe has felt to some degree over the course of 2021.
The CO2 shortage stems from rising gas prices.
Increased gas prices are a grim reality across the globe. Natural gas has increased in cost by 99 percent YTD, due in part to increased demand from harsher winters and supply chain difficulties.
Food-grade CO2 is one victim, with U.K.-based plants shutting down because they couldn't keep up with fuel costs. Food-grade CO2 has a 99.95 percent purity rating, which differentiates it from regular CO2.
CF Industries (NYSE:CF), a U.K.-based and U.S.-owned company that produces fertilizer, also manufactures CO2 as a by-product of that fertilizer. Given the rise in fuel costs, CF Industries shut down its two main plants since it couldn't afford to keep them open profitably.
How a CO2 shortage impacts the food and beverage industry
This type of CO2 carbonates soda and sparkling water. It also helps aerate beer and other alcoholic beverages coming out of taps at pubs. CO2 is a key component in greenhouse operations to help fruit and vegetables grow. It plays a role in packaged foods by eliminating bacteria and extending the shelf life.
In food transportation, CO2 comes in the form of dry ice to keep products fresh until they reach their destination. It's also used to stun pigs and chickens before they're slaughtered for meat.
In short, the applications of food-grade CO2 are plentiful, and a shortage could have widespread implications throughout the nation.
How bad is the CO2 shortage?
With CF Industries shutting down, CO2 production was slashed by 60 percent. Given the severity of the situation, the U.K. government has decided to step in to help keep people in the country fed and well.
What the U.K. government is doing to quell the CO2 shortage
In order to bolster production of food-grade CO2, the U.K. government has decided to meet the costs of operating one of CF Industries' two facilities. Officials have decided that the government will pay to run the Teesside location for three weeks to give the industry a chance to adjust to rising fuel costs.
According to Environment Secretary George Eustice, the cost "will be not a loan, it will be a payment to underwrite some of their fixed costs."
It will be a few days until the plant is able to get back up and running at its full capacity. According to the deal, other CO2 production companies can't shut down in hopes of getting government help.