Analysis of price trends of crude oil, agricultural commodities and policy choices of biofuels in developing countries

Abstract

In recent years, the prices of agricultural commodities in international market have been changing dramatically. This is a very critical issue which is related to a nation’s food security, energy security and sustainable development of its economy. The prices of crude oil and agricultural commodities are not issues isolated from each other; actually, the relationship between them becomes closer due to biofuels. What’s the relationship between them? This paper tested the relationship between the crude oil and agricultural commodities prices in the international market by Granger causality test, we found that there are close relationship between them, and the fluctuations of agricultural commodities prices is the results of crude oil price changes. Therefore, we determined that because of the scarcity of crude oil resources, the rising of crude oil price is inevitable. According to the price trends of crude oil and agricultural commodities in international market, developing countries should make their own policies of biofuels referring to the experience of developed countries, while basing on their resources and socio-economic conditions.   Key words: Biofuels policy, price of crude oil, agricultural commodities prices, developing countries, granger causality test.