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Modeling the relationship between the oil price and global food prices

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  • Chen, Sheng-Tung
  • Kuo, Hsiao-I
  • Chen, Chi-Chung
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    Abstract

    The growth of corn-based ethanol production and soybean-based bio-diesel production following the increase in the oil prices have significantly affect the world agricultural grain productions and its prices. The main purpose of this paper is to investigate the relationships between the crude oil price and the global grain prices for corn, soybean, and wheat. The empirical results show that the change in each grain price is significantly influenced by the changes in the crude oil price and other grain prices during the period extending from the 3rd week in 2005 to the 20th week in 2008 which implies that grain commodities are competing with the derived demand for bio-fuels by using soybean or corn to produce ethanol or bio-diesel during the period of higher crude oil prices in these recent years. The subsidy policies in relation to the bio-fuel industries in some nations engaging in bio-fuel production should be considered to avoid the consequences resulting from high oil prices.

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    Bibliographic Info

    Article provided by Elsevier in its journal Applied Energy.

    Volume (Year): 87 (2010)
    Issue (Month): 8 (August)
    Pages: 2517-2525

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    Handle: RePEc:eee:appene:v:87:y:2010:i:8:p:2517-2525

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    Related research

    Keywords: Grain prices Crude oil price Autoregressive distributed lag model Global Cropland Allocation Model;

    References

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    1. John Dimitropoulos & Lester C. Hunt & Guy Judge, 2004. "Estimating Underlying Energy Demand Trends using UK Annual Data," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 108, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
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    10. Elobeid, Amani E. & Tokgoz, Simla, 2007. "Removing Distortions in the U.S. Ethanol Market: What Does It Imply for the United States and Brazil?," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9808, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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