Oil shocks have become a stronger influence on global food prices. This is the conclusion reached by a researcher from Meiji Gakuin University in Japan, who analyzed how the dependence of food prices on the oil market has changed over the past three decades. For example, from 1997 to 2007, the sensitivity of food inflation to oil shocks increased by 3.53 times in the United States and by 4.74 times in Brazil. By the mid‑2000s, fluctuations in the energy market had become one of the main drivers of food price volatility in many regions of the world. After 2014, however, this dependence began to decline in most regions.
Oil affects food prices not only through fuel for tractors and trucks. Petroleum products are used, directly or indirectly, in the production of fertilizers, raw material processing, intermediate goods manufacturing, and transportation. As a result, changes in the cost or availability of oil affect the entire chain – from agricultural production to the delivery of finished products to the store. The researcher considers this strengthening of the hidden oil dependency to be one of the reasons why food prices have become more responsive to energy market conditions.
To track these changes, the researcher compared the global economy at four points in time – 1997, 2007, 2014, and 2023. For this, he used a computable general equilibrium model that accounts for linkages between different sectors and allows tracing how a shock in one sector propagates to others. The world in the model was divided into seven regions: the United States, Brazil, China, Japan, the European Union, OPEC+, and the rest of the world, while the economy was split into 13 main sectors.
The researcher then simulated unexpected changes in the supply of crude oil, oilseeds, and soybeans, and calculated how they affected food inflation. The magnitude of such shocks was determined based on actual fluctuations in oil production and agricultural output over previous decades. The Monte Carlo method was used to compute a large number of possible scenarios.
The results showed that the role of oil varies greatly from country to country. For example, in OPEC+, the share of oil shocks in food price fluctuations increased from 19.6% to 68.8% between 1997 and 2007, and in the European Union from 10.1% to 33.8%. In the United States, the picture was quite different: more than 98% of food price volatility over the study period was explained by fluctuations in agricultural production, while the impact of oil shocks remained small. Thus, in some economies, food prices depended more on harvests and other agricultural factors, while in others they depended on energy market conditions.
The researcher also compared what happens immediately after an oil shock and after the economy has had time to adjust. In the short term, firms cannot quickly change suppliers, equipment, or production structures, so the price shock propagates along existing supply chains with little opportunity for compensation. For example, for the United States under 2007 conditions, food price fluctuations in this scenario were 2.49 times stronger than in the more flexible long‑term model. Over time, firms can substitute some resources, change production, and reallocate capital, so the effects of the oil shock become weaker.
After peaking, the oil dependency also began to change. Since 2014, it has been declining in most studied regions, particularly noticeably in the United States and China. The Japanese researcher attributes this, among other factors, to changes in energy consumption patterns, improvements in production efficiency, and the development of energy‑saving technologies. However, by 2023, the influence of the oil market on food prices still remained significant, especially in countries with a high share of imported energy resources and petroleum products.
