Agricultural Commodities and Crude Oil Prices: An Empirical Investigation of Their Relationship

Eleni Zafeiriou,Paraskevi Karanikola,Stilianos Tampakis,Stavros Tsiantikoudis,Garyfallos Arabatzis

doi:10.3390/su10041199

Abstract

Within the last few decades, the extended use of biodiesel and bioethanol has established interlinkages between energy markets and agricultural commodity markets. The present work examines the bivariate relationships of crude oil–corn and crude oil–soybean futures prices with the assistance of the ARDL cointegration approach. Our findings confirm that crude oil prices affect the prices of agricultural products used in the production of biodiesel, as well as of ethanol, validating the interaction of energy and agricultural commodity markets. The practical value of the present work is that the findings provide policy makers with insight into the interlinkages between agricultural and energy markets to promote biodiesel or bioethanol by affecting crude oil prices. The novelty of the present work stands on the use of futures prices that incorporate all available information and thus are more appropriate to identify supply and demand shocks and price spillovers than real prices. Finally, the period of study includes extremely low, as well as extremely high, crude oil prices and the results illustrate that biofuels cannot be substituted for crude oil and protect economies from energy volatility.

Highlights

The volatility of crude oil prices, the issue of food security, and the global economic crisis have motivated decision-makers, industries, and economic agents involved in the biofuel sector to expand the use and production of biofuels [1]
The present work provides an insight into the interaction between the crude oil futures market and the soybean and corn futures markets
An issue that is worth mentioning is the great volatility observed within the last decade in the crude oil market

Summary

Introduction

The volatility of crude oil prices, the issue of food security, and the global economic crisis have motivated decision-makers, industries, and economic agents involved in the biofuel sector to expand the use and production of biofuels [1]. The biofuel market is an artificial market, the function of which is regulated by state [3,4]. The role of this market has become crucial in economic growth, satisfying the priority of sustainability. The alternative use of agricultural products such as corn and soybean (either for food or to produce biofuels) is leading to indirect land use change and to a deterioration in the problem of climate change

Methods

Results

Conclusion