Abstract
This paper investigates the relationship between China’s fuel ethanol promotion plan and food security based on the interactions between the crude oil market, the fuel ethanol market and the grain market. Based on the US West Texas Intermediate (WTI) crude oil spot price and Chinese corn prices from January 2008 to May 2018, this paper applies Granger causality testing and a generalized impulse response function to explore the relationship between world crude oil prices and Chinese corn prices. The results show that crude oil prices are not the Granger cause of China’s corn prices, but changes in world crude oil prices will have a long-term positive impact on Chinese corn prices. Therefore, the Chinese government should pay attention to changes in crude oil prices when promoting fuel ethanol. Considering the conduction effect between fuel ethanol and the food market, the government should also take some measures to ensure food security.
Highlights
As a new generation of clean energy that can effectively alleviate energy security problems and environmental pollution problems, fuel ethanol has been widely used in the USA, Brazil, and the European Union
Jadidzadeh and Serletis (2018) used a joint structural vector auto-regression (VAR) model to study the impact of crude oil supply and demand shocks on global corn prices and on US corn prices and found that close to 36% of the variation in the real price of US corn can be attributed to structural supply and demand shocks in the global crude oil market
The purpose of this paper is to examine whether there is an interaction between crude oil prices and Chinese corn prices, so the study will be conducted with the Granger causality test
Summary
As a new generation of clean energy that can effectively alleviate energy security problems and environmental pollution problems, fuel ethanol has been widely used in the USA, Brazil, and the European Union. With the rapid development of the fuel ethanol industry, a large number of agricultural products, like corn, have been used in the production of new biofuels. The energy characteristics of food prices are becoming more and more obvious. The prices of corn and other foods have been affected by factors such as supply, demand and cost, and have suffered from energy prices and energy policies (Xu et al 2017). The increase in ethanol use will strengthen and change the nature of links between agricultural and energy markets (Thompson et al 2009).
Sign-in/Register to view highlights & summary 
Published Version (
Free)
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call