The Effect of Petroleum Prices on Basic Food and Energy Commodities: An investigation through Sequential ADF tests
DOI:
https://doi.org/10.61506/01.00296Keywords:
Petroleum Prices, Food and Energy Commodities, Sequential ADF TestsAbstract
This study examines the correlation between fluctuations in petrol prices and essential commodities in a developing economy, specifically Pakistan. Data from January 2012 to August 2022 has been collected from the Pakistan Bureau of Statistics (PBS), focusing on the most crucial commodities. Through a thorough analysis of a comprehensive dataset covering multiple years, study has delve into the impact of changes in petrol prices on a range of crucial food items and energy variables. This research has uncovered noteworthy connections between the cost of petrol and important everyday items like wheat, sugar, ghee, LPG, gas, and electricity. Findings indicate that there is a direct correlation between petrol prices and the prices of essential food items such as wheat, sugar, and ghee. This suggests that fluctuations in petrol prices can contribute to inflationary pressures on these commodities. In addition, analysis emphasizes the correlation between petrol prices and energy costs. It is found that when petrol prices experience sudden changes, it results in higher prices for LPG, gas, and electricity. In addition, specific commodities like electric charges, gas charges, and veg ghee can demonstrate explosive behaviors, suggesting significant volatility and the possibility of price distortions. According to our research, we suggest a range of policy recommendations. These include the management of vital costs for food, tackling the cost of energy and the welfare of consumers, fostering competition in the markets along with price regulation, diversified sources of energy, carrying out watching and early warning systems, bolstering the efficiency of the market, and enhancing food security. Implementing these policy interventions can effectively address the effects of petrol price fluctuations on essential commodities. This will lead to price stability, safeguard consumer welfare, and enhance food security even in the midst of external shocks. However, additional research and analysis are required to evaluate the practicality and potential consequences of these suggestions within the particular socio-economic setting.
References
Baffes, J. (2007). Oil spills on other commodities. Resources Policy, 32(3), 126-134. DOI: https://doi.org/10.1016/j.resourpol.2007.08.004
Bhar, R., & Nikolova, B. (2009). Oil prices and equity returns in the BRIC countries. World Economy, 32(7), 1036-1054. DOI: https://doi.org/10.1111/j.1467-9701.2009.01194.x
Fardous Alom () No 115346, 2011 Conference, August 25-26, 2011, Nelson, New Zealand from New Zealand Agricultural and Resource Economics Society Abstract:
Fox, M., Martin, P., & Green, G. (2008). Doing practitioner research. Sage. DOI: https://doi.org/10.4135/9781849208994
Hakro, Nawaz A., Omezzine, A. (2010). Microeconomic effects of food and oil Shocks to Oman economy. Middle Eastern Finance and Economics, 6.
Headey, D., & Fan, S. (2008). Anatomy of a crisis: the causes and consequences of surging food prices. Agricultural economics, 39, 375-391. DOI: https://doi.org/10.1111/j.1574-0862.2008.00345.x
Homm, U., & Breitung, J. (2012). Testing for speculative bubbles in stock markets: a comparison of alternative methods. Journal of Financial Econometrics, 10(1), 198-231. DOI: https://doi.org/10.1093/jjfinec/nbr009
Hu, Y. (2017). Testing for bubbles in time series data using long historical series (Doctoral dissertation, The University of Waikato).
Hu, Y., & Oxley, L. (2017). Are there bubbles in exchange rates? Some new evidence from G10 and emerging market economies. Economic Modelling, 64, 419-442. DOI: https://doi.org/10.1016/j.econmod.2017.02.022
Jongwanich, J., & Park, D. (2011). Inflation in developing Asia: pass‐through from global food and oil price shocks. Asian‐Pacific Economic Literature, 25(1), 79-92. DOI: https://doi.org/10.1111/j.1467-8411.2011.01275.x
Jordan, R. C., Ballard, H. L., & Phillips, T. B. (2012). Key issues and new approaches for evaluating citizen‐science learning outcomes. Frontiers in Ecology and the Environment, 10(6), 307-309. DOI: https://doi.org/10.1890/110280
Kilian, L. (2008). The economic effects of energy price shocks. Journal of economic literature, 46(4), 871-909. DOI: https://doi.org/10.1257/jel.46.4.871
Mar 20, 2014 · Many scholars attributed the increase in food prices to increase in the oil price as an input to food production (Obadi, 2014).
Ohimain, E. I. (2015). Diversification of Nigerian electricity generation sources. Energy Sources, Part B: Economics, Planning, and Policy, 10(3), 298-305. DOI: https://doi.org/10.1080/15567249.2010.551249
Phillips, C. R., Doyle, S. P., Harl, A., Carpenter, C. B., & Aschenbrener, M. (2015). Effect of almond hull level in a finishing diet on lamb growth and carcass performance. Journal of Agriculture and Life Science, 2(2), 11-15.
Phillips, P. C., & Yu, J. (2011). Dating the timeline of financial bubbles during the subprime crisis. Quantitative Economics, 2(3), 455-491. DOI: https://doi.org/10.3982/QE82
Phillips, P. C., Shi, S., & Yu, J. (2015). Testing for multiple bubbles: Limit theory of real‐time detectors. International Economic Review, 56(4), 1079-1134. DOI: https://doi.org/10.1111/iere.12131
Rosegrant, M. W., Zhu, T., Msangi, S., & Sulser, T. (2008). Global scenarios for biofuels: impacts and implications. Review of agricultural economics, 30(3), 495-505. DOI: https://doi.org/10.1111/j.1467-9353.2008.00424.x
Shabbir, A., Kousar, S., & Kousar, F. (2020). The role of natural resources in economic growth: new evidence from Pakistan. Journal of Economics, Finance and Administrative Science, 25(50), 221-238. DOI: https://doi.org/10.1108/JEFAS-03-2019-0044
