Global crude oil market shocks and global commodity prices

Abstract

This paper examines the relationship between shocks to the global crude oil market and commodity prices, and whether recent changes in US renewable energy policy have altered this relationship. Although other papers have studied the effect of oil price shocks on commodity prices (particularly agricultural commodity prices), this paper contributes to the literature in that it accounts for endogenous oil price shocks as in Kilian (). We find asymmetric responses in commodity index prices to endogenous oil price shocks, with oil demand shocks leading to higher energy and non‐energy commodity index prices for the full sample period and oil supply shocks producing less of an impact. We also find evidence of heterogeneity after changes in US energy policy in 2006, with a stronger relationship between oil and other commodity prices. Specifically, oil‐specific demand shocks lead to responses of greater magnitude and statistical significance for non‐energy commodity indexes.

Oil prices and agricultural commodity markets: Evidence from pre and during COVID-19 outbreak

“…However, levels of the intensity of this relationship vary through the period of research, with several intervals witnessing both negative and positive interaction. The results of Živkov et al (2019b) , Melichar and Atems (2019) , Su et al (2019) , Kang et al (2019) , Chen et al (2019) and Živkov et al (2019b) can be extended in this segment of the findings, where they found a strong connectedness between crude oil prices and agricultural commodity markets in the periods of increased market turbulence. Besides, our results also extend the findings of Kumar et al (2019), Albulescu et al (2020) , Mensi et al (2017) , Kumar et al (2020) , Kang et al (2019) , Tiwari et al (2018) and Tiwari et al (2021) with the estimates of reaction of the relationship of crude oil prices to agricultural commodity markets.…”

“… Melichar and Atems (2019) unveil asymmetric responses in agricultural commodity prices to crude oil markets, and provide evidence of heterogeneity after changes in US energy policy in 2016, with a strong correlation between crude oil and agricultural commodities prices. Cheng and Cao (2019) confirm the fact that there is a nonlinear causal association between crude oil and agricultural commodity markets.…”

“…In recent years, there have been a large number of studies concentrating on the interrelatedness between crude oil and agricultural commodity markets. In general, most of the previous studies focused on two strands: price-level connectedness ( Vo et al, 2019 ; Taghizadeh-Hesary et al, 2019 ; Shiferaw, 2019 ; Su et al, 2019 ; Pal and Mitra, 2019 ; Melichar and Atems, 2019 ; Cheng and Cao, 2019 ; Živkov et al 2019a ; Živkov et al, 2019b ; Tiwari et al, 2021 ; Kumar et al, 2020 ; Mensi et al, 2017 ; Kumar et al, 2021 ) and volatility spillover effects across the markets under examination ( Lu et al, 2019 ; Fasanya and Akinbowale, 2019 ; Guhathakurta et al, 2020 ; Kang et al, 2019 ; Chen et al, 2019 ; Tiwari et al, 2018 ; Albulescu et al, 2020 ; Kang et al 2019 , 2019 ). The present study examines the price of the related markets in terms of connectedness and spillovers, and we will, therefore, review several articles with respect to this topic in this section.…”

“…More importantly, crude oil prices, as a crucial commodity in the world, have a considerable impact on a wide range of economic sectors in terms of direct and indirect transmissions ( Vo et al, 2019 ; Shiferaw, 2019 ). For individual economies, agricultural commodity prices have remarkable welfare and policy implications ( Melichar and Atems, 2019 ). More precisely, variations in rates of agricultural commodities involve an adjustment in crude oil prices, and crude oil prices is a significant input for transportation and processing in the agricultural sectors ( Su et al, 2019 ).…”

Using Artificial Neural networks and Optimal Scaling Model to Forecast Agriculture Commodity Price: An Ecological-economic Approach

“…In addition, multiple attempts to modelling the effect of oil price on agriculture commodity price have been reported by previous research. They demonstrate how aggregate demand oil price shocks lead to higher non-energy commodity index prices, indicating that the responses of agricultural commodity prices to oil price changes depend greatly on oil-specific shocks (Ahmadi, Behmiri, & Manera, 2016;Chaudhuri, 2001;Melichar & Atems, 2019; Wang, Wu, & Yang, 2014). Moreover, previous studies using numerous methodologies with various strengths have also emphasized on the effects of global warming and climate change on agriculture commodity markets (Akrofi-Atitianti, Ifejika Speranza, Bockel, & Asare, 2018; Haile, Wossen, Tesfaye, & von Braun, 2017).…”