IDEAS home Printed from
   My bibliography  Save this paper

Linking soy oil demand from the US Renewable Fuel Standard to palm oil expansion through an analysis on vegetable oil price elasticities


  • Santeramo, Fabio Gaetano
  • Searle, Stephanie


The United States (US) Renewable Fuel Standard and California’s Low Carbon Fuel Standard support the use of soy biodiesel and renewable diesel in the transport fuel supply for climate mitigation. However, linkages between the markets for soy oil and palm oil, which is associated with very high land use change emissions, could negatively affect the climate performance of soy-based biofuels. This study estimates the own and cross-price elasticities for the supply of soy and palm oils in the US using country-level data from 1992 to 2016 under rational expectations, through a seemingly unrelated regressions system of equations. We find a positive cross-price elasticity of palm oil import with respect to soy oil price and a positive reaction of supply of soy oil to increase in prices of palm oil. These results suggest that US biofuel policies may underestimate substitution between soy and palm oils and thus overestimate the climate benefits from soy-based biofuel.

Suggested Citation

  • Santeramo, Fabio Gaetano & Searle, Stephanie, 2018. "Linking soy oil demand from the US Renewable Fuel Standard to palm oil expansion through an analysis on vegetable oil price elasticities," MPRA Paper 90248, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:90248

    Download full text from publisher

    File URL:
    File Function: original version
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Labandeira, Xavier & Labeaga, José M. & López-Otero, Xiral, 2017. "A meta-analysis on the price elasticity of energy demand," Energy Policy, Elsevier, vol. 102(C), pages 549-568.
    2. Marc Nerlove, 1979. "The Dynamics of Supply: Retrospect and Prospect," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(5), pages 874-888.
    3. Kojima, Yasutomo & Parcell, Joe & Cain, Jewelwayne, 2016. "A Global Demand Analysis of Vegetable Oils for Food and Industrial Use: A Cross-Country Panel Data Analysis with Spatial Econometrics," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235744, Agricultural and Applied Economics Association.
    4. Dahl, Carol & Duggan, Thomas E., 1996. "U.S. energy product supply elasticities: A survey and application to the U.S. oil market," Resource and Energy Economics, Elsevier, vol. 18(3), pages 243-263, October.
    5. Nerlove, Marc, 1972. "Lags in Economic Behavior," Econometrica, Econometric Society, vol. 40(2), pages 221-251, March.
    6. Imbens, Guido W., 2014. "Instrumental Variables: An Econometrician's Perspective," IZA Discussion Papers 8048, Institute of Labor Economics (IZA).
    7. Walter C. Labys, 1977. "Multicommodity substitution patterns in the international fats and oils market," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 4(1), pages 75-84.
    8. Chen, Xiaoguang & Önal, Hayri, 2016. "Renewable energy policies and competition for biomass: Implications for land use, food prices, and processing industry," Energy Policy, Elsevier, vol. 92(C), pages 270-278.
    9. Gohin, A. & Chantret, F., 2010. "The long-run impact of energy prices on world agricultural markets: The role of macro-economic linkages," Energy Policy, Elsevier, vol. 38(1), pages 333-339, January.
    10. E. W. Goddard & S. Glance, 1989. "Demand for Fats and Oils in Canada, United States and Japan," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 37(3), pages 421-443, November.
    11. Michael J. Roberts & Wolfram Schlenker, 2013. "Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate," American Economic Review, American Economic Association, vol. 103(6), pages 2265-2295, October.
    12. Sorda, Giovanni & Banse, Martin & Kemfert, Claudia, 2010. "An overview of biofuel policies across the world," Energy Policy, Elsevier, vol. 38(11), pages 6977-6988, November.
    13. Fabio Santeramo, 2015. "A cursory review of the identification strategies," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 3(1), pages 1-8, December.
    14. Cui, Jingbo & Martin, Jeremy I., 2017. "Impacts of US biodiesel mandates on world vegetable oil markets," Energy Economics, Elsevier, vol. 65(C), pages 148-160.
    15. Steven T. Yen & Wen S. Chern, 1992. "Flexible Demand Systems with Serially Correlated Errors: Fat and Oil Consumption in the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(3), pages 689-697.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Fabio Gaetano Santeramo & Emilia Lamonaca & Marco Tappi & Leonardo Di Gioia, 2019. "Considerations on the Environmental and Social Sustainability of Animal-Based Policies," Sustainability, MDPI, Open Access Journal, vol. 11(8), pages 1-12, April.

    More about this item


    Biofuel; Price elasticity; Oils market; SURE;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P28 - Economic Systems - - Socialist Systems and Transition Economies - - - Natural Resources; Environment
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:90248. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.