Medium to long term impacts of falling energy prices and welfare changes in agriculture sector

Abstract

Since the first energy price shock of 1973 a number of studies have reported the impacts of rising energy prices on agriculture sector. However, in the recent years real energy prices are falling in the international market. Casually one tends to believe that falling energy prices are good to agriculture sector but this may be falsified in the medium-to long-run situations. This paper develops a conceptual model to examine various falling energy price impacts on agriculture sector, and more specifically verifies the hypothesis by using an empirical model of Saskatchewan agriculture, Canada. Findings suggests, at least for Saskatchewan, that producers will not be better-off under falling energy price regime.