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Mutual Responsiveness of Biofuels, Fuels and Food Prices

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  • Ladislav Kristoufek
  • Karel Janda
  • David Zilberman

Abstract

We propose a new approach to analyze relationships and dependencies between price series. For the biofuels markets and the related commodities, we study their mutual responsiveness, which can be understood as price cross-elasticities. Several methodological caveats are uncovered and discussed. We find that both ethanol and biodiesel prices are responsive to their production factors as well as their substitute fossil fuels (ethanol with corn, sugarcane and the US gasoline; and biodiesel with soybeans and German diesel). Responsiveness of all significant pairs increased remarkably during the food crisis of 2007/2008. Causality tests further show that price changes in producing factors lead the changes in biofuels, yet for some price levels, the direction is reversed.

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File URL: http://cama.crawford.anu.edu.au/pdf/working-papers/2012/382012.pdf
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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2012-38.

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Length: 35 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:een:camaaa:2012-38

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Related research

Keywords: Biofuels; Mutual responsiveness; Price cross-elasticity; Causality;

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References

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  1. McPhail, Lihong Lu, 2011. "Assessing the impact of US ethanol on fossil fuel markets: A structural VAR approach," Energy Economics, Elsevier, Elsevier, vol. 33(6), pages 1177-1185.
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  5. Xiaoguang Chen & Haixiao Huang & Madhu Khanna, 2012. "Land-Use And Greenhouse Gas Implications Of Biofuels: Role Of Technology And Policy," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 1250013-1-1.
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  15. Serra, Teresa & Zilberman, David, 2013. "Biofuel-related price transmission literature: A review," Energy Economics, Elsevier, Elsevier, vol. 37(C), pages 141-151.
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Citations

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Cited by:
  1. Papież, Monika, 2014. "A dynamic analysis of causality between prices of corn, crude oil and ethanol," MPRA Paper 56540, University Library of Munich, Germany.
  2. Ciaian, Pavel & Kancs, d'Artis & Rajcaniova, Miroslava, 2012. "Bioenergy and Land Use Change," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil, International Association of Agricultural Economists 126379, International Association of Agricultural Economists.
  3. Ladislav Kristoufek & Karel Janda & David Zilberman, 2013. "Non-linear price transmission between biofuels, fuels and food commodities," Working Papers IES, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies 2013/16, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2013.
  4. Lukas Vacha & Karel Janda & Ladislav Kristoufek & David Zilberman, 2012. "Time-Frequency Dynamics of Biofuels-Fuels-Food System," Papers 1209.0900, arXiv.org.
  5. Bastianin, Andrea & Galeotti, Marzio & Manera, Matteo, 2014. "Causality and predictability in distribution: The ethanol–food price relation revisited," Energy Economics, Elsevier, Elsevier, vol. 42(C), pages 152-160.
  6. Serra, Teresa & Zilberman, David, 2013. "Biofuel-related price transmission literature: A review," Energy Economics, Elsevier, Elsevier, vol. 37(C), pages 141-151.

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