Effects of Retailing Selling Prices of Petrol and Diesel on Food Prices

Nor Ermawati Hussain, Mohd Shahidan Shaari, Diana Nabila Chau Abdullah

Abstract


Oil is the main commodity for all countries in the world. Hence, the fluctuation in the price of the commodity has alarmed policy makers as it can cause severe problems such as food price inflation. The effects of oil prices on food prices have remained a topic of debate. Therefore this study aims to shed some light on the effects of oil prices (RON95, RON97, diesel) on food prices in Malaysia. The ARDL approach was employed and the results show that the price of petrol does not have any effect on food prices. The price of diesel was found to be detrimental to the economy as it can trigger inflation in the long run. However in the short run, the prices of petrol and diesel do not inflict any food price inflation in Malaysia. Therefore, the Malaysian government should control the price of diesel to avert any food price inflation in the long run.

Keyword: RON95, RON97, diesel, food prices

JEL Classifications: Q18, Q3, Q31


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