Rising Temperatures, Falling Yields: The Effect of Climate Shocks on Olive Oil Production in Palestine

This study investigates the effect of climate shocks on olive oil production in Palestine, a region acutely vulnerable to both environmental change and political instability. We estimate the influences of temperature and rainfall fluctuations on four key outcomes: the olive-to-oil yield ratio, extracted oil quantity, cultivated olive volume, and olive oil prices. Our findings reveal that higher maximum temperatures significantly reduce both olive yields and oil output, while an increase in minimum temperatures exerts a positive effect. Increased rainfall enhances oil yield and production but simultaneously depresses prices through supply expansion. Results are robust to fixed-effect specifications and non-linear models, and show strong regional heterogeneity. Southern districts are particularly sensitive to rainfall variability and high temperatures. These findings highlight the economic risks of climate shocks to Palestinian olive oil producers and demonstrate the urgent need for adaptive strategies that are regionally tailored and climate resilient.