Correlations Between Biofuels and Related Commodities Before and During the Food Crisis: A Taxonomy Perspective
Abstract
In this paper, we analyze the relationships between the prices of biodiesel, ethanol and re- lated fuels and agricultural commodities with a use of minimal spanning trees and hierarchical trees. To distinguish between short-term and medium-term effects, we construct these trees for different frequencies (weekly and monthly).
We find that in short-term, both ethanol and biodiesel are very weakly connected with the other commodities. In medium-term, the bio- fuels network becomes more structured.
The system splits into two well separated branches – a fuels part and a food part. Biodiesel tends to the fuels branch and ethanol to the food branch.
When the periods before and after the food crisis of 2007/2008 are compared, the connections are much stronger for the post-crisis period. This is the first application of this methodology on the biofuels systems.