Examine the Impact of Energy Cost on the Food Inflation: Fresh Evidence from Pakistan Economy

Abstract

Food and fuel are essential components of human survival throughout the natural and economic cycles. Inflation and energy costs are major concerns among politicians and academics, particularly the global crude oil price shock after 1970 and the current surge in global oil prices. The growth in energy consumption has a variety of repercussions on the agri-industry, including increased agricultural output and food supply on the one hand, but also increased food prices. The main aim of the study is to investigate the effect of energy cost on food inflation in the case of Pakistan. To achieve the above objectives, this study used the data from 1973 to 2022 in the case of Pakistan, which was collected from World Development Indicators (WDI) and the economic survey of Pakistan, and employed the ARDL technique to estimate the model. This study found that in the long run, the agricultural land, machinery, petrol/oil consumption, and electricity in the agricultural sector, agricultural production, and water availability have a negative effect on food inflation. However, the energy inflation has a positive effect, while the gas consumption in the agricultural sector has no effect on food prices. This study concluded that energy cost has a harmful effect on food inflation. This study recommended that the government should have tight governance, subsidy reforms, farm sector changes, a shift from non-renewable to renewable energy, and a monetary policy free of political interference.