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The Economics of Oil, Biofuel and Food Commodities

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Author Info

  • BAHEL, Eric A.
  • MARROUCH, Walid
  • GAUDET, Gérard

Abstract

We study the effects on the food market of the introduction of biofuels as a substitute for fossil fuel in the energy market. We consider a world economy with an oil cartel and a competitive fringe of farmers producing energy in the form of biofuels. Farmers also produce food and sell it on the world food market. We determine the resulting relationship between prices in the energy and food markets and characterize the cartel's extraction path and the price path of energy. We show that the price of food will be growing as long the oil stock is being depleted, whether population is growing or not, and that it will keep growing after the oil stock is exhausted if population is growing. An analysis of the effects of the productivity of land use in either the food or the biofuel sectors is carried out.

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File URL: https://papyrus.bib.umontreal.ca/jspui/handle/1866/4826
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Bibliographic Info

Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 2011-02.

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Length: 26 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:mtl:montde:2011-02

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Related research

Keywords: Biofuel; Oil depletion; Population growth; Energy price; Food price.;

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References

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  1. Ciaian, Pavel & Kancs, d'Artis, 2010. "Interdependencies in the Energy-Bioenergy-Food Price Systems: A Cointegration Analysis," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61009, Agricultural and Applied Economics Association.
  2. Frederick Van der Ploeg & Cees A. Withagen, 2010. "Is There Really a Green Paradox?," CESifo Working Paper Series 2963, CESifo Group Munich.
  3. GAUDET, Gérard & MOREAUX, Michel & WITHAGEN, Cees, 2005. "The Alberta Dilemma: Optimal Sharing of a Water Resource by an Agricultural and an Oil Sector," Cahiers de recherche 2005-18, Universite de Montreal, Departement de sciences economiques.
  4. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer, vol. 15(4), pages 360-394, August.
  5. Nazlioglu, Saban, 2011. "World oil and agricultural commodity prices: Evidence from nonlinear causality," Energy Policy, Elsevier, vol. 39(5), pages 2935-2943, May.
  6. Chakravorty, Ujjayant & Hubert, Marie-Helene & Nostbakken, Linda, 2009. "Fuel versus Food," Working Papers 2009-20, University of Alberta, Department of Economics.
  7. Rajagopal, Deepak & Zilberman, David, 2007. "Review of environmental, economic and policy aspects of biofuels," Policy Research Working Paper Series 4341, The World Bank.
  8. Saraly Andrade de Sa & Charles Palmer & Stefanie Engel, 2010. "Ethanol production, food and forests," LSE Research Online Documents on Economics 27950, London School of Economics and Political Science, LSE Library.
  9. Quentin Grafton & Tom Kompas & Ngo Van Long, 2012. "Substitution between bio-fuels and fossil fuels: is there a Green Paradox?," CIRANO Working Papers 2012s-10, CIRANO.
  10. Hochman Gal & Sexton Steven E & Zilberman David D, 2008. "The Economics of Biofuel Policy and Biotechnology," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(2), pages 1-24, December.
  11. Hongli Feng & Bruce A. Babcock, 2010. "Impacts of Ethanol on Planted Acreage in Market Equilibrium," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 789-802.
  12. repec:dgr:uvatin:2010020 is not listed on IDEAS
  13. Sjak Smulders & Yacov Tsur & Amos Zemel, 2010. "Announcing Climate Policy: Can a Green Paradox Arise without Scarcity?," CESifo Working Paper Series 3307, CESifo Group Munich.
  14. Chakravorty, Ujjayant & Magné, Bertrand & Moreaux, Michel, 2008. "A dynamic model of food and clean energy," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1181-1203, April.
  15. Hassler, John & Sinn, Hans-Werner, 2012. "The Fossile Episode," CEPR Discussion Papers 9256, C.E.P.R. Discussion Papers.
  16. Hubert, Marie-Helene & Chakravorty, Ujjayant & van Kooten, G. Cornelis, 2008. "Biofuels, Agriculture And Climate Change," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44259, European Association of Agricultural Economists.
  17. Ujjayant Chakravorty & Marie-Hélène Hubert & Michel Moreaux & Linda Nøstbakken, 2012. "The Long Run Impact of Biofuels on Food Prices," CESifo Working Paper Series 3876, CESifo Group Munich.
  18. Salant, Stephen W, 1976. "Exhaustible Resources and Industrial Structure: A Nash-Cournot Approach to the World Oil Market," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1079-93, October.
  19. Sinn, Hans-Werner, 2012. "The Green Paradox: A Supply-Side Approach to Global Warming," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262016680, December.
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Citations

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Cited by:
  1. Quentin Grafton & Tom Kompas & Ngo Van Long, 2012. "Substitution between bio-fuels and fossil fuels: is there a Green Paradox?," CIRANO Working Papers 2012s-10, CIRANO.
  2. R. Quentin Grafton & Tom Kompas & Ngo Van Long, 2010. "Biofuels Subsidies and the Green Paradox," CESifo Working Paper Series 2960, CESifo Group Munich.
  3. R. Quentin Grafton & Tom Kompas & Ngo Van Long, 2010. "Do Biofuel Subsidies Reduce Greenhouse Gas Emissions?," International and Development Economics Working Papers idec10-01, International and Development Economics.
  4. Ngo Van LONG, 2014. "The Green Paradox under Imperfect Substitutability between Clean and Dirty Fuels," Cahiers de recherche 02-2014, Centre interuniversitaire de recherche en économie quantitative, CIREQ.

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