The economic impacts of increasing biofuel production
2011
Pokrivčák, J., Slovak Univ. of Agriculture in Nitra (Slovak Republic). Faculty of Economics and Management | Rajčániová, M. | Qineti, A.
The main purpose of this study was to analyze the statistical relationship among the prices of biofuels (ethanol, biodiesel), fossil fuels (gasoline, diesel and crude oil) and food prices (maize, wheat and sugar). Most of the literature derived a positive relationship between ethanol, gasoline and oil prices or biodiesel and diesel prices and the prices of maize, wheat and sugar or rapeseed and other energy commodities; in other words, it was expect that an increase in biofuel price leads to an increase in the demand for energy crops and therefore, an increase in food prices. In order to achieve our goals, we first collected weekly data for selected time series. Standard tools of time series analysis were used to analyse the relationships among the price series. We conducted a series of statistical tests, starting with tests for unit roots, estimation of cointegrating relationships between price pairs using Johansen cointegration tests, evaluating the inter-relationship among the variables using Vector Autoregressive Model in case od non-cointegrated variables or Vector Error Corrections Model for cointegrated variables and Impulse Response Function (IRF). The direction of causation in the variables was tested by means of Granger causality tests. First part of the study focused on the rtelationship between biofuel and fossil fuel prices. The results provide evidence of cointegration relationship between oil and gasoline prices, but no cointegration between ethanol, gasoline and ethanol, oil prices. As a result, we used a VAR model on first differences. Second part of the study aimed to analyze the statistical relationship between fuel and food prices. In order to account for structural break we divided the observed period into two periods: 2005-first half of 2008 and second half of 2008 - 2010.
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