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Disentangling the Links between Energy and Agricultural Markets: The Shale Gas Phenomenon

Ignacio Pérez-Domínguez, Sergio-René Araujo-Enciso and Fabien Santini
Authors registered in the RePEc Author Service: Sergio René Araujo Enciso ()

No 205633, 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California from Agricultural and Applied Economics Association, Western Agricultural Economics Association

Abstract: Technological developments in recent years, especially the 'fracking' technique, have allowed for a economically profitable extraction of shale gas, evolving into an increasingly important source of energy in the United States. Agriculture is increasingly more linked energy markets, traditionally through the input side (i.e. energy and fertilizer costs), but since the 2000s also through the production of biofuels. To analyse the potential effects on agricultural markets of the 'shale gas boom', a scenario analysis is carried out with the Aglink-Cosimo model. This scenario depicts a situation where the North America (US and Canada) benefits from certain energy price advantage versus the rest of the world. Our analysis shows a sizeable gain in competitiveness for US crop producers, with average production costs in the US decreasing considerably over the baseline period. These lower costs of production are expected to trigger lower producer prices and higher production, especially for energy intensive crops such as maize, sorghum and sugar beet. However, the presence of uncertainty regarding the future development of crude oil prices can considerably affect these margins.

Keywords: shale gas; agriculture; fertilizer markets; energy; modelling; Agricultural and Food Policy; Demand and Price Analysis (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-ino and nep-reg
Date: 2015-07-26
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