The Emergence of Biofuels and the Co-Movement Between Crude Oil and Agricultural Prices

31 Pages Posted: 14 Nov 2009

See all articles by Francisco Penaranda

Francisco Penaranda

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Augusto Rupérez Micola

Universitat Pompeu Fabra

Date Written: November 13, 2009

Abstract

Biofuels are becoming an alternative to non-renewable energy sources but we know little about the economic mechanisms influencing their prices. This paper studies the interrelationships between the spot prices of oil and those of agricultural commodities used as biofuel feedstocks. Using daily data since 1988, we identify a co-movement after 2005 that does not appear for other food-related commodities and is not due to general economic variables. We also find traces of the co-movement in the prices of a large biofuel stock. The results amount to the first systematic piece of empirical evidence linking spot oil and agricultural markets via the emergence of biofuels.

Keywords: Biofuels, co-movement, ethanol, oil, structural breaks, threshold regressions

JEL Classification: G15, Q18, O13

Suggested Citation

Penaranda, Francisco and Rupérez Micola, Augusto, The Emergence of Biofuels and the Co-Movement Between Crude Oil and Agricultural Prices (November 13, 2009). Available at SSRN: https://ssrn.com/abstract=1505392 or http://dx.doi.org/10.2139/ssrn.1505392

Francisco Penaranda

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

Augusto Rupérez Micola (Contact Author)

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

HOME PAGE: http://www.ruperezmicola.net

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