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Impact of Energy Markets on the EU Agricultural Sector, The

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  • Simla Tokgoz

Abstract

The objective of this study is to analyze the impact of crude oil prices on the EU agricultural sector in an era when the biofuels sector is expanding because of policy initiatives and the desire to find alternative fuel sources. To this end, first a baseline is set up for the EU ethanol, grain, and dried distillers grains markets. In the next step, two different scenarios are run. The first scenario incorporates a 10-Euros-per-barrel increase in the EU crude oil price with the ethanol import tariffs in place. The second scenario incorporates the same shock with the ethanol import tariffs removed. In the first scenario, higher crude oil prices increase ethanol consumption, production, and therefore grain prices. In the second scenario, the impact of trade liberalisation is larger than the impact of the higher crude oil price. So, grain prices decline in this scenario despite an expansion in ethanol consumption. If there were a high enough crude oil price shock, which would affect the EU ethanol market more than trade liberalisation, the net impact on grain, feed, and food prices from the crude oil price shock would be mitigated by the increased trade from trade liberalisation. The study shows that the impact of energy prices on the EU agricultural sector is increasing with the emergence of the biofuels sector. It also illustrates the importance of trade policy in responding to higher crude oil and grain prices.

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Bibliographic Info

Paper provided by Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University in its series Food and Agricultural Policy Research Institute (FAPRI) Publications with number 09-wp485.

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Date of creation: Jan 2009
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Handle: RePEc:ias:fpaper:09-wp485

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Keywords: bioeconomic models; energy; trade analysis and policy.;

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References

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  1. Amani Elobeid & Simla Tokgoz, 2008. "Removing Distortions in the U.S. Ethanol Market: What Does It Imply for the United States and Brazil?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 918-932.
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Cited by:
  1. Miljkovic, Dragan & Shaik, Saleem & Braun, Dane, 2012. "Impact of biofuel policies on livestock production in the United States," Journal of Policy Modeling, Elsevier, vol. 34(6), pages 817-831.
  2. Esmaeili, Abdoulkarim & Shokoohi, Zainab, 2011. "Assessing the effect of oil price on world food prices: Application of principal component analysis," Energy Policy, Elsevier, vol. 39(2), pages 1022-1025, February.
  3. Ciaian, Pavel & Kancs, d'Artis, 2011. "Interdependencies in the energy-bioenergy-food price systems: A cointegration analysis," Resource and Energy Economics, Elsevier, vol. 33(1), pages 326-348, January.

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