Rising energy prices linked to conflict in the Middle East are beginning to affect businesses and farmers in Lithuania, as higher costs for fuel and fertilisers increase pressure across the economy.
Economists say the impact is already being felt as oil, natural gas and diesel prices climb, raising costs for transportation, agriculture and industry. If the conflict continues, analysts warn the effects could spread further to consumers.
Tadas Povilauskas, an analyst at SEB Bank, said several cost pressures are building simultaneously.
“Oil and natural gas prices are rising, and diesel prices are already close to the levels seen at the start of the war in Ukraine,” Povilauskas said. “This is bad for everyone who uses diesel. Transport companies will quickly pass these costs on to their clients – whether they are industrial firms, wholesalers or retailers.”
According to him, such increases can rapidly ripple through the economy, pushing up expenses across multiple sectors.
Economists say it is still too early to predict the full impact, but much will depend on how long tensions in the Middle East last.
Oil nearing critical levels
Evaldas Stankevičius, an economist at Kaunas University of Technology, said economic strain typically intensifies when oil prices exceed $120 per barrel. On Monday, global oil prices briefly reached about $118 per barrel.
“Up to roughly $90 per barrel the situation is considered relatively stable. Economic crises tend to occur more often when prices exceed the $120 threshold,” he said.
Stankevičius pointed to historical precedents. Oil prices rose to around $147–150 per barrel in 2008 and surpassed $120 in 2022 after Russia launched its full-scale invasion of Ukraine, triggering sharp increases in fertiliser prices at the time.
Fertiliser costs surge
The prices of fertilisers – a crucial input for all agricultural production – have also risen this week. Audrius Vanagas, head of the Lithuanian Grain Growers Association, described the current situation as extraordinary.
He said nitrogen fertiliser prices in warehouses rose by about 70 euros per ton overnight, while supplies have become scarce. Earlier increases were already driven by the European Union’s carbon border adjustment mechanism.
“Some producers and suppliers stopped selling fertilisers and, when they resumed trade, surprised the market with even higher prices,” Vanagas said.
According to the association, about 60% of grain growers currently have enough fertiliser for the first application on their fields, but an additional 40,000 to 50,000 tons will still need to be imported to meet overall demand.
However, imports have slowed significantly due to the new carbon-related charges.
Shortages and rising production costs
One of Lithuania’s largest fertiliser sellers, Agrokoncernas, has temporarily halted sales of nitrogen fertilisers after stocks ran low.
“We realised we simply don’t have enough reserves,” said company head Edgaras Šakys.
He said the situation is compounded by rising natural gas prices, which have doubled since December. Gas is the key raw material used to produce nitrogen fertilisers.
“At the moment fertilisers are almost like gold,” Šakys said, noting that suppliers across Europe are struggling to set prices due to volatile gas costs.
Farmers facing pressure
Farmers say the overall situation in the agricultural sector is becoming increasingly difficult.
Jonata Pauraitė‑Raudonė, a farmer from the Kaunas region, said her farm currently has enough fertiliser for the season, but the broader outlook is worrying.
“Everything is becoming more expensive – fertilisers, fuel and other essential inputs — while grain prices remain unchanged,” she said. “We’re trying to adapt, but it’s unclear how long we can continue like this.”
Astrida Miceikienė, a professor at Vytautas Magnus University, said a prolonged conflict could increase production costs in agriculture and disrupt logistics chains.
However, she noted that some exporters could benefit if global agricultural prices rise during periods of market volatility.
Impact on food prices uncertain
Whether higher fertiliser and fuel costs will lead to higher food prices in shops remains unclear.
Stankevičius said significant price increases could occur if electricity and diesel prices continue to rise.
“If energy prices increase further, we could relatively easily see 10% to 20% growth passed on to food prices,” he said.
However, Vanagas noted that global grain prices remain low – close to eight-year lows – which could limit immediate increases in products such as bread.
Meanwhile, Gediminas Tamašauskis, vice minister at the Ministry of Agriculture, said the government is seeking to delay the EU’s carbon border tax on imported fertilisers to ease pressure on farmers.
“To buy one ton of nitrogen fertiliser today, a farmer must sell about three tons of wheat,” Tamašauskis said. “These are very high costs and they threaten the viability of farms.”
He added that authorities are also considering additional support measures, including preferential loans through the national development bank ILTE, tax relief or payment deferrals for farmers.
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