Effect of Oil Price Changes on Food Prices

Effect of Oil Price Changes on Food Prices Student’s Name Institutional Affiliation Effect of Oil Price Changes on Food Prices Among the top objectives of the Millennium Development Goals (MDGs) and Sustainable Development Goals (SDGs) are the eradication of hunger and poverty. Moreover, for the past few years oil price fluctuations and increasing food prices have been a serious concern in the global arena. Since 2000s, food prices have been experiencing a steady increase and the volatility of oil prices continues to worsen. Prices for food products such as rice, corn and wheat and other food crops have hit the ceilings affecting most of the food importing countries. Developing countries have been the primary recipients of the effects of these changes by experiencing hikes in food and energy prices due to the nature of their macroeconomic environment. The concern on food issues were brought to the attention of world leaders during the mid-2000 food crisis. Since then various summits on food security have been held to identify the major causes of the food crisis and any possible intervention strategies. Among the factors that have been identified to contribute to high food prices, oil price changes have continued to dominate the debate arena. Therefore, whenever there is an increase in food prices, oil price changes are also investigated to determine their role in the hikes. It is believed that an increase in oil prices also causes an increase in food prices. Moreover, hiking these two prices is likely to worsen the situation (Nagyova et al., 2016). An increase in oil prices affects energy-intensive agricultural inputs such as fuel and fertilizers that have a direct effect on transportation costs. Therefore, changes in oil prices have a direct effect on food production costs which is the primary determinant of prices (Baumeister & Kilian, 2014). Additionally, an increase in food production costs will lead to an increase in import bills during an increase in oil prices especially for food-importing nations exerting pressure on domestic food prices. Therefore, in this paper I intend to investigate the impact of oil prices increases on food prices in oil-exporting countries In international arena, food prices are measured using the food price index which provides monthly changes in a basket of food commodities in the global prices. The index consists of meat price index, cereal price index, dairy price index, vegetable oil price index and cereal price index. The data for these price indices was sourced from the United Nations database for Food and Agricultural organization (FAO). The oil price means the price of crude oil in global markets. The US Energy Information Administration provided data for oil prices. Data o...