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The emergence of biofuels and the co-movement between crude oil and agricultural prices

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Author Info
Francisco Peñaranda ()
Augusto Rupérez-Micola ()
Abstract

Biofuels are becoming an alternative to non-renewable energy sources but we know little about the economic mechanisms influencing their prices. This paper studies the interrelationships between the spot prices of oil and those of agricultural commodities used as biofuel feedstocks. Using daily data since 1988, we identify a co-movement after 2005 that does not appear for other food-related commodities and is not due to general economic variables. We also find traces of the co-movement in the prices of a large biofuel stock. The results amount to the first systematic piece of empirical evidence linking spot oil and agricultural markets via the emergence of biofuels.

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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1174.

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Date of creation: Oct 2009
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Handle: RePEc:upf:upfgen:1174

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Web page: http://www.econ.upf.edu/

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Related research
Keywords: Biofuels; co-movement; ethanol; oil; structural breaks; threshold regressions;

Find related papers by JEL classification:
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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  2. Lance J. Bachmeier & James M. Griffin, 2006. "Testing for Market Integration: Crude Oil, Coal, and Natural Gas," The Energy Journal, International Association for Energy Economics, vol. 27(2), pages 55-72.
  3. Martin Banse & Hans van Meijl & Andrzej Tabeau & Geert Woltjer, 2008. "Will EU biofuel policies affect global agricultural markets?," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 35(2), pages 117-141, June. [Downloadable!] (restricted)
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  5. 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. [Downloadable!] (restricted)
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  6. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
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  7. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  8. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March. [Downloadable!] (restricted)
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  9. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April. [Downloadable!] (restricted)
  10. Hooker, Mark A., 1996. "What happened to the oil price-macroeconomy relationship?," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 195-213, October. [Downloadable!] (restricted)
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This page was last updated on 2009-11-27.

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