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T4 c gilbert_mugera_rv
- 1. STRUCTURAL CHANGE IN THE RELATIONSHIP BETWEEN ENERGY AND FOOD PRICES Christopher L. Gilbert and Harriet K. Mugera SAIS Bologna Center, Johns Hopkins University Department of Economics and Management, University of Trento Workshop on Biofuels and Food Security IFPRI Washington D.C. 19-20 November, 2014
- 2. U.S. ethanol production grew dramatically starting 2004 and plateauing in 2010 0 2500 5000 7500 10000 12500 15000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 milliongallons Source: Renewable Fuels Association Gilbert-Mugera, IFPRI biofuels workshop 2
- 3. Correlation between changes in grains prices and change in crude oil prices. -0.30 -0.20 -0.10 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 52weekWTIreturncorrelation corn wheat Gilbert-Mugera, IFPRI biofuels workshop 3
- 4. U.S. Policy Interventions June 2002 US Farm Bill - Farm Security and Rural Investment May2004 VEETC introduced for ethanol blending with gasoline July 2005 Renewable Fuels Standard (RFS1) - Energy Act June 2006 MTBE ban became effective - liability waivers not granted December 2007 Renewable Fuels Standard (RFS2) - Energy Act May 2008 The Food Conservation and Energy Act October 2008 The Energy Improvement and Extension Act January 2009 VEETC credit tax reduced to $0.45 per gallon February 2010 EPA finalizes RFS Program for 2010 and beyond December 2011 The VEETC tax credit expired January 2012 Import tariffs on ethanol for fuel cut Gilbert-Mugera, IFPRI biofuels workshop 4
- 5. Structural breaks Crude Oil Gasoline Corn Wheat Ethanol 2002 August May June June (pre-sample) 2004 July April September July 2005 August 2006 November March October September 2007 January 2008 October October October August October 2010 October November October August September Gilbert-Mugera, IFPRI biofuels workshop 5
- 6. Estimated impact and equilibrium responses to a 1% rise in crude oil prices Initial date Final date Corn Wheat Ethanol Gasoline Imp. Eq. Imp. Eq. Imp. Eq. Imp. Eq. 1 01/28/00 07/12/02 0.02% 0.00% 0.06% 0.00% - - 0.87% 1.02% 2 07/19/02 09/17/04 0.02% 0.00% 0.13% 0.00% - - 0.87% 1.10% 3 09/24/04 09/22/06 0.20% 0.36% 0.09% 0.04% 0.19% 1.63% 1.14% 1.10% 4 09/29/06 09/10/10 0.39% 0.22% 0.33% 0.00% 0.29% 0.22% 0.85% 0.83% 5 09/17/10 12/28/12 0.54% 0.55% 0.30% 0.00% 0.41% 0.06% 0.76% 0.90% Gilbert-Mugera, IFPRI biofuels workshop 6 • Grains prices were unresponsive to crude oil prices in Regimes 1 and 2. • The pass-through for corn prices has risen steadily since 2004 and is now around 0.5. There is little sign of decay. • Pass through for wheat has also rise but by less; the decay is total. • Pass-through to gasoline has been consistent at between 0.8 and 1.0.
- 7. Gilbert-Mugera, IFPRI biofuels workshop 7 Think globally, act locally … … in the global context
- 8. Gilbert-Mugera, IFPRI biofuels workshop 8 Thank you for your attention
Editor's Notes
- Crucial dates in red