Some authors are attempting to argue that “one of the biggest risks that the world is facing right now is that of the ‘peak phosphorus’ crisis.” With all the geopolitical instability at present, such views are absurd. But more to the point, these concerns are not likely supported by the physical realities that govern phosphorus production.

The resource alarmism continues to find new outlets. One that I’ve been watching on-and-off for a few years is that of “peak phosphorus,” which—as the name sounds—is analogous to peak oil.

In the long term, it is widely acknowledged that cheap fertilizers will become a thing of the past. As the remaining reserves decrease (below approximately 50 percent), capital costs can start to increase exponentially. This will have significant implications for farmers and food production systems. In the short term, an 800 percent spike in 2008 in the price of phosphate rock and other fertilizer commodities resulted from a combination of factors (including the price of oil, increased demand for fertilizers due to increasingly meat- and dairy-based diets, increased demand for non-food crops like biofuels and lack of short-term supply capacity to produce enough phosphate rock to meet demand). As a result of the price spike, farmers around the world held back on purchasing fertilizers, which partly caused the price to drop. The subsequent global financial crisis led to the sharp decline in demand and hence price. However the global financial crisis also pushed global food insecurity to an unprecedented level, with over one billion people hungry. As of January 2011, the food price index has reached unprecedented levels, and phosphate rock prices are on the increase ...

“Critics of the idea of peak production often argue that the market will take care of scarcity, that resource scarcity is relative, and one scarce resource can simply be replaced by another indefinitely, because as price rises, investment in new technology will always improve efficiency of extraction and use. This is the basis of the market system—neoclassical economic theory—which functions for a narrowly defined system, but does not acknowledge the finite nature of non-renewable resources like phosphate rock (or oil). This means that the concepts of peak oil and peak phosphorus (which are based on the non-homogenous nature of non-renewable resources) are not supported by the adherents of the market system ...

Back in 2011, two researchers from the University of Technology in Sydney, Australia published a study in the journal Sustainability which adopted the following positions towards peak phosphorus and a corresponding global phosphorus security strategy:

In order to achieve a preferred ‘soft-landing’ outcome, an integrated and globally coordinated approach to managing phosphorus is required.”

The subsequent three years of reality since publication of this work have set a far different tone than the authors describe.

Between 2008 and 2013, the price of phosphorus dropped by nearly 60 percent in inflation-adjusted terms, and the price has almost halved in nominal terms since late 2011. The FAO’s food price index has also declined since 2011, and now stands about equal to where it was during the 1960s and 1970s.

The authors’ explanations for the 2008 phosphorus price spike are also unsatisfactory. The massive spike was extremely transitory—lasting only two years after which prices returned to a level only about twice the pre-spike value (a far cry from the ten-fold increase at the height of the spike). If this spike was due in any large degree by “the price of oil, increased demand for fertilizers due to increasingly meat- and dairy-based diets, increased demand for non-food crops like biofuels,” then how do the authors explain how the price of oil has not declined much since the late 2007/early 2008 peak but the price of phosphorus has plummeted? In general, there is no significant correlation between the price of oil and phosphorus since the financial crisis.

Furthermore, demand for fertilizers and biofuel crops does not follow the price of phosphorus since 2007, either. While the world’s apparent phosphate rock consumption declined slightly from 2008 to 2009 (by about 8 percent), the demand rapidly rebounded and by 2012 was already 12 percent higher than in 2008. No apparent surplus/deficit in phosphate rock supplies during the past decade appears in the International Fertilizer Industry Association database. Global production has continued to increase unabated, and now stands at 224 million metric tons per year, which is 34 percent higher than in 2008.

As for the supposed extreme food insecurity during the global financial crisis, a review of the FAO’s database on food security indicators reveals the recent food insecurity hysteria was entirely unwarranted. There appear to have been no significant or unusual indications of global food insecurity over this timeframe. In fact, key indicators such as the prevalence of undernourishment, depth of the food deficit, and the prevalence of food inadequacy all saw substantial declines (aka, improvements) during and after the financial crisis—both in absolute and relative terms. Indeed, the data is startling in its appearance that global food security actually improved during the financial crisis.

The USDA database for the percent of household final consumption expenditures spent on food indicates that, on average, food costs have declined globally as a share of total household expenditures since 2009. For countries such as India, the share of household spending on food dropped from 32 percent in 2009 to 25 percent in 2012. That is a substantial increase in food security, not decrease.

Classifying both phosphorus and oil as finite resources, and then critiquing the application of neoclassical economic theory to both of them, fails to incorporate the basic fact that phosphorus is an element, not a suite of compounds such as oil. Phosphorus is “the 11th most abundant element in the earth’s crust ... [with an] average phosphorus concentration of the earth’s upper crust [of] approximately 0.1% P.” Certainly it is a finite resource by the technical definition, but we are in no way depleting the net reservoir of this element which cycles through various environmental systems.

As the latest USGS mineral report notes, “world resources of phosphate rock are more than 300 billion tons.” This is a supply of greater than 1,300 years at current global production rates, but we also need to acknowledge that phosphorus can be recycled and reused—allowing us to extend the use of phosphorus, for all practical purposes, forever. In fact, phosphorus can reasonably be viewed as a renewable resource. At present, there is no need—and hence, no economic driver—for large-scale phosphorus recycling and reuse. But this recycling and reuse is technically feasible, and undoubtedly would become economically feasible in the presence of a suitable demand.

Consequently, applying the peak oil framework to phosphorus is erroneous. They are two very different physical systems—one (phosphorus) an element and another (oil) as a suite of compounds—that cannot be directly compared within the context of resource depletion. We could theoretically use up all the oil on the planet and be left with no oil resource. We can never use up all the phosphorus, much as we can never use up all the copper, gold, or other elements—including carbon. Thus, peak phosphorus production is defined by the residence time within various environmental compartments that we largely choose to define by our production needs. This is far different than the situation with fossil fuels—whose production maxima cannot exceed the total resource of this truly finite and essentially non-renewable resource.

We will progress, as we already are, in moving from the most readily accessible and low-cost sources of phosphorus through to more difficult to access reservoirs, but this is not a true resource depletion path and there is no reason to believe it will lead to an inevitable near-term production peak. There will be advances in extraction technologies and mining, processing, and distribution efficiencies over time that will serve to increase the economically recoverable phosphorus reserves and the rate at which they can be converted into marketable products, as analogous advances have proven with other “finite” resources. We have seen this innovation pattern repeatedly and continuously with metals mining and petroleum extraction.

A great deal of current worldwide oil production was thought to be uneconomic in the not-too-distant past, but the naysayers were proven wrong by ingenuity and innovation in response to demand. The peak phosphorus alarmists will be similarly proven wrong for the exact reason that they do not properly apply neoclassical economic theory to the problem at hand. So, once again, we see academics incorrectly railing against “the [current] market system” and instead proposing some type of central command-and-control methodology. This is an all-too-common default response among many intellectuals, and it overlooks the repeated failures of resource-based central planning efforts over history.

Indeed, the USGS provides some useful lessons that are worth reviewing with respect to getting caught up in an alarmist analysis of reserves depletion and corresponding peak production:

“Reserves data are dynamic. They may be reduced as ore is mined and/or the extraction feasibility diminishes, or more commonly, they may continue to increase as additional deposits (known or recently discovered) are developed, or currently exploited deposits are more thoroughly explored and/or new technology or economic variables improve their economic feasibility. Reserves may be considered a working inventory of mining companies’ supply of an economically extractable mineral commodity. As such, magnitude of that inventory is necessarily limited by many considerations, including cost of drilling, taxes, price of the mineral commodity being mined, and the demand for it.

Reserves will be developed to the point of business needs and geologic limitations of economic ore grade and tonnage. For example, in 1970, identified and undiscovered world copper resources were estimated to contain 1.6 billion metric tons of copper, with reserves of about 280 million metric tons of copper. Since then, about 400 million metric tons of copper have been produced worldwide, but world copper reserves in 2011 were estimated to be 690 million metric tons of copper, more than double those in 1970, despite the depletion by mining of more than the original estimated reserves.

Future supplies of minerals will come from reserves and other identified resources, currently undiscovered resources in deposits that will be discovered in the future, and material that will be recycled from current in-use-stocks of mineral or from minerals in waste disposal sites. Undiscovered deposits of minerals constitute an important consideration in assessing future supplies.”

In short, as Yogi Berra would say, it’s tough to make predictions, especially about the future.

The real threat from peak phosphorus would arise if we did move away from the current dominantly market-based system to a more centrally planned and coordinated model. On our current path, peak phosphorus is not something we need to devote significant policy and regulatory attention to.