Food and Oil Prices

Paul Chefurka plotted oil prices and food index prices and looked at how they compare over the last ten years.  The correlation coefficient was 0.93, meaning they’re all but related to one another.  What an interesting and obvious exercise.

We never talk about the effects of oil on the production and transportation of foods.  But, what’s puzzling about this graph is that food goes up a couple months before oil does.  This seems counter-intuitive, given that one would think as oil prices go up, pesticides (made with petroleum) and food transportation costs would follow.  Not the other way around.  Chefurka suggests that they’re reacting to the same underlying stimulus, but that food happens to be more sensitive.  Anyone have any thoughts on what this stimulus is?

Regardless, the sharp increase in both food and oil over the last few years is disconcerting for anyone in the food industry (from restaurants to fast food chains).  And I think it’s confirmation that we’re undoubtedly moving towards more localized subsistence-based food economies.

(read at: Influx Insights)

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Comments

  1. i love it

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