Price linkages between biodiesel and vegetable oils

Biodiesel can work as an alternative form of traditional fuels. Currently, crude oil market situation is unstable due to significant decrease in crude oil prices. Thus, volatile prices of crude oil put pressure on agriculture and food industry and low prices of crude oil may cause food prices to decrease. Additionally, lower oil prices have an impact on vegetable oils used in biodiesel production. Consequently, the diminishing trend in crude oil prices might seem to be beneficial for biodiesel producers due to the fact that rapeseed oil, soybean oil, palm oil belong to dominating feedstocks for biodiesel production. However, diesel prices would decline with lower crude oil prices, meaning that low diesel prices push down biodiesel prices. Therefore, this paper focuses on long-run relationship between biodiesel prices and prices of vegetable oils used for biodiesel production. The aim of the paper is to investigate price development and price linkages between biodiesel prices and selected prices of vegetable oils based on linear modelling technique called ordinary least-squares regression.