Structural Analysis of the Prices of Selected Biodiesel Feedstocks

Purpose – Biodiesel, a plant-based source, is found in oil crops such as. coconut, palm, and soybean. This paper examined the behavior and price relationships of three selected biodiesel feedstocks: coconut oil, palm oil, and soybean oil. Design/Methodology/Approach – This study used monthly data for coconut oil, palm oil, and soybean oil prices from 2006 to 2020. Exploratory data analysis was implemented with time plots constructed and some descriptive statistics computed. The study performed structural analysis, namely, variance decomposition and impulse response analysis using the VAR (vector autoregressive) model to investigate the price relationships among the three biodiesel feedstocks. Findings – It was found that coconut oil, palm oil, and soybean oil prices generally did not affect one another despite being close substitutes. This implies that these commodities do not compete with each other in terms of prices. Research Implications – The findings can help understand price behavior given that these feedstocks are considered to be close substitutes and alternative sources to fossil fuel. Knowing the relationship between prices can contribute to policy development, which is parallel to the sustainable development goal (SDG) 7 that seeks affordable and clean energy sources. Lastly, this study initiates further research involving the biofuel industry worldwide since this is only focused on a few biodiesel feedstocks.