The Effect of Fuel Prices on Food Prices in Kenya


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Authors

  • Lucy W. Ngare Kenyatta University
  • Okova W. Derek Kenya Pipeline Company

Abstract

High food prices are one of the major risks facing households from developing countries. Food prices have attracted renewed interest among policy experts in identifying appropriate policy instruments to counter the effect of price vulnerability. This paper evaluates the effect of fuel prices on food prices by testing for Granger causality and cointegration applied to diesel, maize, beans, cabbage, and potatoes price data for the period 2010-2018. The results revealed a unidirectional Granger causality running from diesel prices to cabbage and potatoes prices but there was no causal relationship with maize and beans prices.  The findings suggest that there is a long-run price relationship between perishable foods and fuel prices with an increase in the price of diesel resulting in a significant increase in the price of cabbages and potatoes. The study recommends a policy of cushioning an increase in food prices by introducing a tax relief once the fuel price hits a certain level.Keywords: Food prices, Fuel prices, Cointegration, Granger causalityJEL Classifications: Q48, Q43, Q13DOI: https://doi.org/10.32479/ijeep.10600

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Author Biographies

Lucy W. Ngare, Kenyatta University

Dr. Lucy Wangare Ngare is a lecturer at the department of Agricultural Economics, Kenyatta University. She has over 10 years of experience in teaching both at the undergraduate and graduate levels as well as research on issues touching on small holder Agriculture and food markets. Lucy holds a MSc in Agricultural Economics and a PhD in Agribusiness Management. She has published in peer reviewed papers, conference papers, and policy briefs.

Okova W. Derek, Kenya Pipeline Company

Eng. Okova Wangaki Derek is an Oil and Gas expert at the operations department, Kenya Pipeline Company. He has over 15 years active engagement in the oil and gas industry both in government and various multinational Organisations. Okova holds a BSc and MSc in Civil Engineering whose thesis focused on hydrocarbons.

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Published

2021-06-08

How to Cite

Ngare, L. W., & Derek, O. W. (2021). The Effect of Fuel Prices on Food Prices in Kenya. International Journal of Energy Economics and Policy, 11(4), 127–131. Retrieved from https://www.econjournals.com/index.php/ijeep/article/view/10600

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