Resource information
The price of oil could play a
significant role in influencing the expansion of biofuels.
However, this issue has not been fully investigated yet in
the literature. Using a global computable general
equilibrium model, this study analyzes the impact of oil
price on biofuel expansion, and subsequently, on food
supply. The study shows that a 65 percent increase in oil
price in 2020 from the 2009 level would increase the global
biofuel penetration to 5.4 percent in 2020 from 2.4 percent
in 2009. A doubling of oil price in 2020 from its baseline
level, or a 230 percent increase from the 2009 level, would
increase the global biofuel penetration in 2020 to 12.6
percent. The penetration of biofuels is highly sensitive to
the substitution possibility between biofuels and their
fossil fuel counterparts. The study also shows that
aggregate agricultural output drops due to an oil price
increase, but the drop is small in major biofuel producing
countries as the expansion of biofuels would partially
offset the negative impacts of the oil price increase on
agricultural outputs. An increase in oil price would reduce
global food supply through direct impacts as well as through
diversion of food commodities and cropland toward the
production of biofuels.
