The Linkages between Crude Oil and Food Prices

Abstract

This paper aims to indicate the linkages between crude oil prices and selected food price indexes (dairy, meat, oils, cereals, and sugar) and provide an empirical specification of the direction of the impact. This paper reviews the fuel–food price linkage models with consideration to the time series literature. This study adopts several methods, namely the Augmented Dickey–Fuller test, Granger causality test, the cointegration test, the vector autoregression model, and the vector error correction model, for studying the price transmission among the crude oil and five selected food groups. The data series covers the period between January 1990 and September 2020. The empirical results from the paper indicate that there are long-term relationships between crude oil and meat prices. The linkage of crude oil prices occurred with food, cereal, and oil prices in the short term. Furthermore, the linkages between the analyzed variables increased in 2006–2020.

An Auxiliary Index for Reducing Brent Crude Investment Risk—Evaluating the Price Relationships between Brent Crude and Commodities

“…In the non-energy sector, the prices of metal commodities such as copper and iron ore are closely related to the Brent Crude oil price, but they cannot be used as auxiliary investing tools due to the low r xy in price change rate. Moreover, we conclude that a weak or moderate price relationship exists between Brent Crude oil and agro-commodities, which supports the finding of several papers [28].…”

“…Kousik et al (2020) stated it is still uncertain whether oil prices have relationships with agro-commodity prices [27]. Roman et al (2020) indicated that there are long-term relationships between crude oil and meat prices. The linkage of crude oil prices occurred with food, cereal, and oil prices has been observed in the short term [28].…”

“…Roman et al (2020) indicated that there are long-term relationships between crude oil and meat prices. The linkage of crude oil prices occurred with food, cereal, and oil prices has been observed in the short term [28]. Vo et al (2019) indicated that not every oil shock has the same effect on agricultural price fluctuations, and similarly the effects of aggregate demand shocks on the agricultural market vary [29].…”

Beyond Food Prices: An Analysis On Sub-Indices

“…(Food and Agricultural Orgnaization of United Nations) Literature Review There are few studies which focus on the relationships between sub-indices of food commodity prices. Roman et al (2020) study the relationships between crude oil and food indices. (Dairy, meat, oils, cereals and sugar) They apply cointegration, Vector Auto Regression (VAR) model and Granger causality techniques.…”

Structural Break and Causal Analyses of U.S. Corn Use for Ethanol and Other Corn Market Variables

“…Although the need for causal justification of the indirect effects of biofuels has been recognized, most of the existing causal analyses focus on interactions among biofuel prices, agricultural prices, oil prices and other commodity prices [10][11][12][13][14][15][16][17][18][19][20][21][22][23][24][25]. These studies have generally found a strong causal relationship running from crude oil prices to agricultural prices but a tenuous or non-existing causal relationship in the other direction [10,13,16].…”