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The Economics of Oil, Biofuel and Food Commodities

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

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/xmlui/handle/1866/4826
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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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  1. Ujjayant Chakravorty & Marie-Helene Hubert & Michel Moreaux & Linda Nostbakken, . "The Long Run Impact of Biofuels on Food Prices," Discussion Papers Series, Department of Economics, Tufts University 0805, Department of Economics, Tufts University.
  2. Hassler, John & Sinn, Hans-Werner, 2012. "The Fossile Episode," CEPR Discussion Papers 9256, C.E.P.R. Discussion Papers.
  3. Quentin Grafton, R. & Kompas, Tom & Van Long, Ngo, 2012. "Substitution between biofuels and fossil fuels: Is there a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 328-341.
  4. CHAKRAVORTY Ujjayant & MAGNE Bertrand & MOREAUX Michel, 2006. "A dynamic model of food and clean energy," LERNA Working Papers 06.10.203, LERNA, University of Toulouse.
  5. van der Ploeg, Frederick & Withagen, Cees, 2012. "Is there really a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 342-363.
  6. Saraly Andrade de Sa & Charles Palmer & Stefanie Engel, 2010. "Ethanol Production, Food and Forests," Environmental Economy and Policy Research Working Papers 48.2010, University of Cambridge, Department of Land Economics, revised 2010.
  7. 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.
  8. Sinn, Hans-Werner, 2008. "Public policies against global warming: A supply side approach," Munich Reprints in Economics 19638, University of Munich, Department of Economics.
  9. Chakravorty, Ujjayant & Hubert, Marie-Helene & Nostbakken, Linda, 2012. "The Long Run Impact of Biofuels on Food Prices," Working Papers 2012-11, University of Alberta, Department of Economics.
  10. Pavel Ciaian & d'Artis Kancs, 2009. "Interdependencies in the Energy-Bioenergy-Food Price Systems: A Cointegration Analysis," EERI Research Paper Series EERI_RP_2009_06, Economics and Econometrics Research Institute (EERI), Brussels.
  11. repec:dgr:uvatin:2010020 is not listed on IDEAS
  12. Smulders, Sjak & Tsur, Yacov & Zemel, Amos, 2012. "Announcing climate policy: Can a green paradox arise without scarcity?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 364-376.
  13. Gaudet, Gérard & Moreaux, Michel & Withagen, Cees, 2005. "The Alberta Dilemma: Optimal Sharing of a Water Resource by an Agricultural and an Oil Sector," IDEI Working Papers 352, Institut d'Économie Industrielle (IDEI), Toulouse.
  14. Feng, Hongli & Babcock, Bruce A., 2008. "Impacts of Ethanol on Planted Acreage in Market Equilibrium," Staff General Research Papers 12959, Iowa State University, Department of Economics.
  15. 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.
  16. 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, June.
  17. Nazlioglu, Saban, 2011. "World oil and agricultural commodity prices: Evidence from nonlinear causality," Energy Policy, Elsevier, vol. 39(5), pages 2935-2943, May.
  18. Rajagopal, Deepak & Zilberman, David, 2007. "Review of environmental, economic and policy aspects of biofuels," Policy Research Working Paper Series 4341, The World Bank.
  19. Chakravorty, Ujjayant & Hubert, Marie-Helene & Nostbakken, Linda, 2009. "Fuel versus Food," Working Papers 2009-20, University of Alberta, Department of Economics.
  20. 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.
  21. repec:dgr:uvatin:20100020 is not listed on IDEAS
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