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The Effect of Petroleum Prices on Basic Food and Energy Commodities: An investigation through Sequential ADF tests

Author

Listed:
  • Waqar Muhammad Khan

    (Assistant Professor, Department of Economics, University of Chakwal, Pakistan)

  • Moniba Sana

    (Assistant Professor, Department of Economics, University of Chakwal, Pakistan)

  • Shahid Akbar

    (Assistant Professor, Department of Economics, University of Chakwal, Pakistan)

Abstract

This study examines the correlation between fluctuations in petrol prices and essential commodities in a developing economy, specifically Pakistan. Data from January 2012 to August 2022 has been collected from the Pakistan Bureau of Statistics (PBS), focusing on the most crucial commodities. Through a thorough analysis of a comprehensive dataset covering multiple years, study has delve into the impact of changes in petrol prices on a range of crucial food items and energy variables. This research has uncovered noteworthy connections between the cost of petrol and important everyday items like wheat, sugar, ghee, LPG, gas, and electricity. Findings indicate that there is a direct correlation between petrol prices and the prices of essential food items such as wheat, sugar, and ghee. This suggests that fluctuations in petrol prices can contribute to inflationary pressures on these commodities. In addition, analysis emphasizes the correlation between petrol prices and energy costs. It is found that when petrol prices experience sudden changes, it results in higher prices for LPG, gas, and electricity. In addition, specific commodities like electric charges, gas charges, and veg ghee can demonstrate explosive behaviors, suggesting significant volatility and the possibility of price distortions. According to our research, we suggest a range of policy recommendations. These include the management of vital costs for food, tackling the cost of energy and the welfare of consumers, fostering competition in the markets along with price regulation, diversified sources of energy, carrying out watching and early warning systems, bolstering the efficiency of the market, and enhancing food security. Implementing these policy interventions can effectively address the effects of petrol price fluctuations on essential commodities. This will lead to price stability, safeguard consumer welfare, and enhance food security even in the midst of external shocks. However, additional research and analysis are required to evaluate the practicality and potential consequences of these suggestions within the particular socio-economic setting.

Suggested Citation

  • Waqar Muhammad Khan & Moniba Sana & Shahid Akbar, 2023. "The Effect of Petroleum Prices on Basic Food and Energy Commodities: An investigation through Sequential ADF tests," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(3), pages 912-921.
    • Handle: RePEc:rfh:bbejor:v:12:y:2023:i:3:p:912-921
    DOI: https://doi.org/10.61506/01.00296
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    References listed on IDEAS

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