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Oil price, biofuels and food supply

  • Timilsina, Govinda R.
  • Mevel, Simon
  • Shrestha, Ashish

The price of oil could play a significant role in influencing the expansion of biofuels, but this issue has yet to be fully investigated in the literature. Using a global computable general equilibrium (CGE) model, this study analyzes the impact of oil price on biofuel expansion, and subsequently, on food supply. The study shows that a 65% increase in oil price in 2020 from the 2009 level would increase the global biofuel penetration to 5.4% in 2020 from 2.4% in 2009. If oil prices rise 150% from their 2009 levels by 2020, the resulting penetration of biofuels would be 9%, which is higher than that would be caused by current mandates and targets introduced in more than forty countries around the world. The study also shows that aggregate agricultural output drops due to an oil price increase, but the drop is small in major biofuel producing countries as the expansion of biofuels would partially offset the negative impacts of the oil price increase on agricultural outputs. An increase in oil price would reduce global food supply through direct impacts as well as through the diversion of food commodities and cropland towards the production of biofuels.

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Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 39 (2011)
Issue (Month): 12 ()
Pages: 8098-8105

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Handle: RePEc:eee:enepol:v:39:y:2011:i:12:p:8098-8105
Contact details of provider: Web page: http://www.elsevier.com/locate/enpol

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  1. Hengyun Ma & Les Oxley, 2009. "China’s Energy Economy: A Survey of the Literature," Working Papers in Economics 09/02, University of Canterbury, Department of Economics and Finance.
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  6. Xiaodong Du & Dermot J. Hayes, 2008. "Impact of Ethanol Production on U.S. and Regional Gasoline Prices and on the Profitability of the U.S. Oil Refinery Industry, The," Center for Agricultural and Rural Development (CARD) Publications 08-wp467, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  7. Timilsina, Govinda R. & Shrestha, Ashish, 2010. "Biofuels : markets, targets and impacts," Policy Research Working Paper Series 5364, The World Bank.
  8. Birur, Dileep & Hertel, Thomas & Tyner, Wally, 2008. "Impact of Biofuel Production on World Agricultural Markets: A Computable General Equilibrium Analysis," GTAP Working Papers 2413, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  9. Timilsina, Govinda & Beghin, John C. & van der Mensbrugghe, Dominique & Mevel, Simon, 2010. "The Impacts of Biofuels Targets on Land-Use Change and Food Supply: A Global Cge Assessment," Staff General Research Papers 32206, Iowa State University, Department of Economics.
  10. Mark W. Rosegrant & Tingju Zhu & Siwa Msangi & Timothy Sulser, 2008. "Global Scenarios for Biofuels: Impacts and Implications ," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(3), pages 495-505.
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