Agricultural commodities and petroleum prices

Abstract

This paper aims at statistically demonstrating the relationship between international prices of agricultural products and international petroleum prices. At first, the paper characterizes the relationship between petroleum prices and urea prices. After that, it describes the behavior of urea prices and prices of commodities chosen for this study. The results show that the trend in prices of these commodities is significantly influenced by the trend in petroleum prices. The estimated elasticities vary between 0.47 and 0.61, indicating that between 50 percent and 60 percent of the variations in petroleum prices are transmitted to these commodities’ prices. The results also show that short-term shocks on petroleum prices have significant and lasting effects on these commodities’ prices.