The Impact of Energy Prices on Food Prices : A Case Study Using Norwegian Monthly Data from 2015 to 2023

Abstract

This study examines the relationship between energy prices and food prices in Norway. It specifically focuses on the period following a significant spike in food prices, commonly referred to as a breakpoint, which occurred in January 2022. We also explore the effect of energy prices on wheat, meat, and rice. We find a breakpoint in energy prices in April 2020 and a breakpoint in food prices in January 2022. The empirical analysis reveals mixed results in the period before the breakpoint in January 2022. The Ordinary Least Squares (OLS) and the Autoregressive (AR) model identify a significant 18-month lag effect of energy prices on food prices, while the Cochrane-Orcutt model does not show this effect. However, all three models are consistent in showing that the impact of energy prices on food prices becomes more amplified after the breakpoint in January 2022. We observe varying impacts of energy price changes across different food commodities. While wheat and rice prices increased 18 months after energy price changes, meat prices remain largely unaffected, except after the breakpoint in the food prices. Our analysis uncovers a unique trend in food price adjustments: Price increases predominantly take place in February and July, contributing to 68% of the total increase. Following the breakpoint in food prices, these two months account for an even larger share of the overall food price surge, rising to 76%.