Impact of Crude Oil Price Volatility on Procurement and Inventory Strategies in the Middle East

Suleiman Ibrahim Shelash Mohammad (), Khaleel Ibrahim Al-Daoud (), Badrea Saleh Al Oraini (), Menahi Mosallam Alqahtani (), Asokan Vasudevan () and Imad Ali ()
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Suleiman Ibrahim Shelash Mohammad: Department of Electronic Marketing and Social Media, Economic and Administrative Sciences, Zarqa University, Jordan; & Research Follower, INTI International University, 71800 Negeri Sembilan, Malaysia
Khaleel Ibrahim Al-Daoud: Department of Accounting, Business School Faculties, Al Ahilya Amman University, Amman, Jordan
Badrea Saleh Al Oraini: Department of Business Administration, College of Business and Economics, Qassim University, Qassim, Saudi Arabia
Menahi Mosallam Alqahtani: Department of Management, Management Science Faculty, Community College of Qatar, Qatar
Asokan Vasudevan: Faculty of Business and Communications, INTI International University, 71800 Negeri Sembilan, Malaysia
Imad Ali: GNIOT Institute of Management Studies, Greater Noida, Uttar Pradesh, India

International Journal of Energy Economics and Policy, 2025, vol. 15, issue 2, 715-727

Abstract: Crude oil price volatility is a critical factor influencing procurement costs and inventory management in oil-dependent industries. This study examines the impact of crude oil price fluctuations on procurement expenses and inventory turnover, providing empirical insights into how businesses respond to oil market uncertainties. Given the direct link between oil price changes and supply chain costs, understanding these relationships is essential for developing risk mitigation strategies and enhancing supply chain resilience. The study employs time series analysis (ARIMA), econometric modelling (multivariate regression), and sensitivity analysis to quantify the effects of crude oil price volatility on procurement and inventory decisions. Data from multiple firms across industries were analysed to assess how fluctuations in oil prices influence procurement expenses, inventory turnover, and firm-level procurement strategies. Results indicate that higher crude oil price volatility leads to a significant increase in procurement costs, with an estimated impact of $3.96 million per unit increase in volatility. Additionally, inventory turnover declines as oil price volatility rises, as firms tend to hold onto stock longer to hedge against price uncertainty. Larger firms experience higher procurement costs but benefit from economies of scale, while smaller firms rely on agility and flexible sourcing strategies to manage cost fluctuations. The findings emphasize the need for predictive analytics, supplier diversification, and adaptive inventory management to mitigate procurement risks. Businesses must adopt data-driven procurement strategies and AI-driven forecasting models to navigate crude oil price uncertainties effectively. Future research should explore industry-specific procurement trends and the role of sustainability in reducing oil price dependencies.

Keywords: Crude Oil Price Volatility; Procurement; Inventory Management; Supply Chain Risk; Middle East (search for similar items in EconPapers)
Date: 2025
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DOI: 10.32479/ijeep.18950

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