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Are there multiple bubbles in the ethanol–gasoline price ratio of Brazil?

Author

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  • El Montasser, Ghassen
  • Gupta, Rangan
  • Martins, Andre Luis
  • Wanke, Peter

Abstract

This paper tests for the existence of bubbles in the ethanol–gasoline price ratio in Brazil from 2000 to 2012 using right-tailed ADF tests. Results suggest the existence of two bubbles: one which has already burst (during the re-election of President Lula); and one which has been ongoing since 2010, thus corroborating empirical and anecdotal evidence in the Brazilian sugarcane industry. Freezing gasoline prices not only depressed ethanol prices but also depressed investments in new sugarcane crops and distillation plants.

Suggested Citation

  • El Montasser, Ghassen & Gupta, Rangan & Martins, Andre Luis & Wanke, Peter, 2015. "Are there multiple bubbles in the ethanol–gasoline price ratio of Brazil?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 19-23.
    • Handle: RePEc:eee:rensus:v:52:y:2015:i:c:p:19-23
    DOI: 10.1016/j.rser.2015.07.085
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    3. Aloisio S. Nascimento Filho & Hugo Saba & Rafael G. O. dos Santos & João Gabriel A. Calmon & Marcio L. V. Araújo & Eduardo M. F. Jorge & Thiago B. Murari, 2021. "Analysis of Hydrous Ethanol Price Competitiveness after the Implementation of the Fossil Fuel Import Price Parity Policy in Brazil," Sustainability, MDPI, vol. 13(17), pages 1-12, September.
    4. Barbosa, Társis Prado & Eckert, Jony Javorski & Roso, Vinícius Rückert & Pujatti, Fabrício José Pacheco & da Silva, Leonardo Adolpho Rodrigues & Horta Gutiérrez, Juan Carlos, 2021. "Fuel saving and lower pollutants emissions using an ethanol-fueled engine in a hydraulic hybrid passengers vehicle," Energy, Elsevier, vol. 235(C).
    5. Eckert, Jony Javorski & Silva, Fabrício L. & da Silva, Samuel Filgueira & Bueno, André Valente & de Oliveira, Mona Lisa Moura & Silva, Ludmila C.A., 2022. "Optimal design and power management control of hybrid biofuel–electric powertrain," Applied Energy, Elsevier, vol. 325(C).
    6. Potrykus, Marcin, 2023. "Price bubbles in commodity market – A single time series and panel data analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 110-117.
    7. Alola, Andrew Adewale, 2022. "The nexus of renewable energy equity and agricultural commodities in the United States: Evidence of regime-switching and price bubbles," Energy, Elsevier, vol. 239(PD).
    8. Laurini, Márcio Poletti, 2017. "The spatio-temporal dynamics of ethanol/gasoline price ratio in Brazil," Renewable and Sustainable Energy Reviews, Elsevier, vol. 70(C), pages 1-12.
    9. Xie, Zixiong & Chen, Shyh-Wei & Wu, An-Chi, 2019. "Asymmetric adjustment, non-linearity and housing price bubbles: New international evidence," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    10. Luo, Jiawen & Ji, Qiang, 2018. "High-frequency volatility connectedness between the US crude oil market and China's agricultural commodity markets," Energy Economics, Elsevier, vol. 76(C), pages 424-438.
    11. Luo, Jiawen & Marfatia, Hardik A. & Ji, Qiang & Klein, Tony, 2023. "Co-volatility and asymmetric transmission of risks between the global oil and China's futures markets," Energy Economics, Elsevier, vol. 117(C).
    12. Derick David Quintino & Heloisa Lee Burnquist & Paulo Ferreira, 2022. "Relative Prices of Ethanol-Gasoline in the Major Brazilian Capitals: An Analysis to Support Public Policies," Energies, MDPI, vol. 15(13), pages 1-23, June.

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    More about this item

    Keywords

    Brazil; Bubbles; Ethanol–gasoline price-ratio; Right-tailed ADF tests;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices

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