January 28, 2011

Oil and Food Prices: The Close Correlation

This graph from Paul Chefurka plots together the Food Price Index data from the UN Food and Agriculture Organization and the monthly average oil price from the U.S. Energy Information Administration. As Chefurka observes, there is an astonishingly close relationship: "the correlation coefficient of the two data sets is 0.93!" Chefurka also notes that food prices seem to lead oil prices by a few months, indicating that they are responding to the same underlying set of circumstances.

Hat tip: Energy Bulletin

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