Abstract
The relationship between oil prices and food prices is complex, and maize is the most prominent example. Whether the development of bioenergy will exacerbate the price increase of maize caused by the increasing price of oil is a topic that is attracting great attention. This paper studies the relationship between oil prices and maize prices. First, the effects of the development of biomass energy on maize price in theory is analyzed by constructing a theoretical model that includes the effects of the cost channel and the demand channel, while setting the maize–oil price ratio as a trigger for the demand channel. Then, this paper empirically analyzes the price data. Both theoretical and empirical analyses show the effects of the demand channel in the long term; that is, the effect of the development of bioenergy on maize prices is weak, and maize prices did not increase sharply. The effect of the cost channel is the main cause of the increases in the price of maize and other foods.
Highlights
With the development and application of science and technology in energy and agriculture, the link between oil price and food price becomes complex and strong
This paper has revealed the relationship between oil prices and maize prices, especially considering the influence of developing and producing bioenergy
The major concern is whether the development of bioenergy exacerbates the rise in maize prices when the oil price is growing
Summary
With the development and application of science and technology in energy and agriculture, the link between oil price and food price becomes complex and strong. This study first constructs a petroleum price–maize price model that combines the cost channel and the demand channel and it establishes the threshold conditions for the demand channel to play a role in the model, thereby theoretically analyzing the impact of oil prices on maize prices. The empirical analysis is carried out in combination with the price data, and the estimation bias problem that may exist in the model is overcome, and the robustness test is designed to further ensure the model estimation result These efforts are a positive complement to existing research, re-examining the complex relationship between oil prices and food prices, such as for maize, and answering the question of whether the development of biomass energy would exacerbate the problem of rising maize prices because of rising oil prices.
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