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Crude oil price variability and its impact on ethanol prices

Author

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  • Jan POKRIVČÁK

    (Department of Economics, Faculty of Economics and Management, Slovak University of Agriculture in Nitra, Nitra, Slovak Republik)

  • Miroslava RAJČANIOVÁ

    (Department of Economics, Faculty of Economics and Management, Slovak University of Agriculture in Nitra, Nitra, Slovak Republik)

Abstract

The world annual biofuel production has exceeded 100 billion litres in 2009. The development of the biofuel production is partly influenced by the government support programs and partly by the development of oil prices. The main purpose of this paper is to analyze the statistical relationship between ethanol, gasoline and crude oil prices. We aim to check the correlation among these variables and to analyze the strength and direction of a possible linear relationship among the variables. We are interested in analyzing how each variable is related to another, so we evaluate the inter-relationship among the variables in the Vector Autoregression (VAR) and the Impulse Response Function (IRF). In order to achieve our goal, we first collected weekly data for each variable from January, 2000 to October, 2009. The results provide evidence of the cointegration relationship between oil and gasoline prices, but no cointegration between ethanol, gasoline and ethanol, oil prices. As a result, we used a VAR model on first differences. After running the Impulse Response Function, we found out that the impact of the oil price shock on the other variables is considerable larger than vice versa. The largest impact of oil price shock was observed on the price of gasoline.

Suggested Citation

  • Jan POKRIVČÁK & Miroslava RAJČANIOVÁ, 2011. "Crude oil price variability and its impact on ethanol prices," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 57(8), pages 394-403.
    • Handle: RePEc:caa:jnlage:v:57:y:2011:i:8:id:42-2010-agricecon
    DOI: 10.17221/42/2010-AGRICECON
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    References listed on IDEAS

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    1. Zhang, Zibin & Lohr, Luanne & Escalante, Cesar & Wetzstein, Michael, 2010. "Food versus fuel: What do prices tell us?," Energy Policy, Elsevier, vol. 38(1), pages 445-451, January.
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    Cited by:

    1. Karel Janda & Ladislav Kristoufek & David Zilberman, 2012. "Biofuels: policies and impacts," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 58(8), pages 372-386.
    2. Pavla BLAHOVA & Karel JANDA & Ladislav KRISTOUFEK, 2014. "The perspectives for genetically modified cellulosic biofuels in the Central European conditions," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 60(6), pages 247-259.
    3. Karel Janda & Ladislav Krištoufek, 2019. "The Relationship Between Fuel and Food Prices: Methods and Outcomes," Annual Review of Resource Economics, Annual Reviews, vol. 11(1), pages 195-216, October.
    4. Giray GOZGOR & Cahit MEMIS, 2015. "Price volatility spillovers among agricultural commodity and crude oil markets: Evidence from the range-based estimator," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 61(5), pages 214-221.

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