When the United States-Israel and Iran conflict began on February 28, oil prices immediately skyrocketed. Since then, the world has contended with endless supply chain disruptions, price increases, and many anxious moments.
Tensions amongst the nations are high, though a ceasefire has given the world a glimmer of hope. Unfortunately, despite the fragile agreement, the Strait of Hormuz is still a potential flashpoint.
Much like the Panama or Suez Canals, the Strait of Hormuz is a critical transit point between the Persian Gulf and Asia. It also serves as a linchpin for the oil industry, as about 20% of the world’s oil travels through the strait.
Since the conflict began, the world has seen numerous threats in and around the narrow waterway, leaving the oil market reeling. Almost immediately, crude oil prices surpassed $100 per barrel. Soon after, gas and diesel prices rose – they’re currently up more than a dollar since the end of February.
And while a ceasefire has reduced some risk, oil and gas prices haven’t budged. Crude oil prices are hovering around $100 per barrel, but rest shakily on updates from Washington, D.C. and Tehran.
While most people only see their local service station’s gas and diesel prices, oil’s role stretches far beyond transportation and impacts almost all industries.
For industries like copper, oil is part of the entire supply chain process. From copper ore mining and processing to manufacturing and shipping, every step uses oil.
And while supply chain managers plan for minor price fluctuations, if prices stay high, businesses can only eat so much of the cost before passing it along to others.
Logistics is an all-encompassing part of the global supply chain, covering planning, forecasting, management, and implementation.
As oil prices rise, so do transportation costs. While it’s normal for markets to fluctuate because of seasonal changes or global trade, large jolts can wreak havoc. Many businesses have forecasts and plans that allow them to absorb short-term price changes. Over time, though, businesses may have no choice but to pass along some costs to consumers.
And while we might complain about gas prices at our local pump, the truth is most companies don’t have any control over costs. Crude oil prices depend on many factors, including domestic and international supplies, spot pricing, and supply/demand cycles. All it takes is one change in production or demand, and prices fluctuate immediately.
“When you experience disruptions or cost increases in the supply chain, you quickly realize how critical strong, trusted partnerships are for navigating the challenge, KrisTech’s Supply Chain Director, Marcus Tagliaferri, said. “In many cases, you have a window of time to make short-term decisions—such as purchasing additional raw materials to build inventory. While this approach comes with added holding costs, it can help mitigate the impact of anticipated price increases.
Ultimately, it becomes a balancing act: weighing carrying costs against rising material prices. When managed effectively, these decisions not only help stabilize your organization’s cost structure in the near term but, more importantly, protect your customers from immediate disruptions or pricing volatility.”
Oil is a crucial component of both the materials we source and how they get to us.
Market volatility is nothing new, but swift price changes affect what companies order – and from whom. For example, high gas prices may force manufacturers to source materials from partners less far away. Since the new partner is closer, shipping costs will be slightly more manageable.
Efficient and effective material sourcing is often a lesson in networking. Companies with only a few partners often struggle more when the economy shifts. Those with more partners not only see lower costs compared to their peers, but also fewer supply issues. This is because they can quickly pivot, saving time, money, and stress.
Beyond shipping, oil prices influence manufacturing costs, leading to less cost-effective production and pricier finished products for consumers. In fact, sometimes the cost of manufacturing increases before raw materials reach the loading dock.
Believe it or not, copper mining costs correlate closely with oil costs.
According to Wood Mackenzie, for every 10% increase in oil prices, copper mining costs rise 3.5%. That means the 41% jump in crude oil prices results in a roughly 14% increase in mining expenses. Although the damage isn’t as bad as other metal mining, like iron, added expenses are never welcome.
Additionally, if crude averages about $100 a barrel — around 47% above the 2025 average — mining costs could climb 20% for iron ore, 16% for copper, and 9% for gold. Beyond mining, we have to consider oil’s impact on other aspects of copper production, including processing and smelting.
The cost of oil also directly drives plastic prices, including polyethylene (PE) and PVC used in wire insulation. In both cases, manufacturers make these plastics from petroleum or petroleum derivatives.
When oil prices rise, some industries can pivot to off-grade materials to reduce production expenses. The problem is that off-grade materials don’t perform at the same level as standard high-quality products, making them risky for some manufactured products.
True to their name, off-grade materials have slight imperfections, either in density, color, or other physical properties. These small imperfections are enough to prevent them from earning prime grade designations.
NOTE: While off-grade materials might offer an alluring solution to combat skyrocketing material costs, they also present safety concerns. Off-grade products could work for certain non-spec’d applications or as a non-critical jacketing option, but aren’t as safe as prime materials. This could lead to fires and other safety risks.
You can find oil or one of its derivatives used across many manufacturing processes, including:
Basically, oil is involved from the moment workers unload materials from the truck to when finished goods are ready to ship. But the part it plays in the manufacturing supply chain runs deep, as it directly and indirectly influences operations.
Direct impacts include higher costs for shipping, electricity, diesel, and materials, and potential losses tied to spot pricing. Spot pricing, as the name implies, is how much you can pay for a product immediately. Typically, this type of buying is popular in industries with high volatility, unpredictable demand, and in flex markets.
Indirectly, high oil prices could lead to rising material costs and higher losses attributed to waste and scrap. In this case, mistakes compound. You don’t just lose the material but the premium you paid for it, too.
If it costs more to buy raw materials and move inventory, companies may have limited options. They can choose to face the situation, pay the premium and maintain stock levels, order less and maintain budget, or search for better pricing on the open market.
At the same time, risk management becomes even more vital as the environment grows more volatile. Oftentimes, this means leaning into diversification – for partners, shippers, material suppliers, sourcing companies, and even buyers.
“This is why diversification in the supply chain is so important,” Tagliaferri explained. “One partner may be more heavily impacted than another, and having alternative relationships allows you to lean on different partners to help bridge a supply disruption or mitigate short-term cost increases.”
Maintaining a strong network of partners helps defray some costs while maintaining a steady supply of materials. This network is also useful for negotiating spot pricing when needed or during an emergency.
Beyond establishing a strong supply chain network, risk management also helps companies hedge against potential pitfalls. This includes signing long-term material contracts when prices are good, shielding themselves from volatility. This, in turn, keeps pricing low throughout the supply chain.
On the other hand, not understanding risk management can set companies up for a double whammy. High prices caused by supply strains present a danger on both sides of the supply chain. Not only are manufacturers paying more to source materials, but they may also sell less because of higher prices.
Absolutely no surprises here – long story short, everything you need to move products from Point A to B likely uses oil.
When gas and diesel prices spike amid supply issues, so does the cost of moving freight. However, manufacturers can find creative ways to reduce costs by flexing their supply chain networks. This means actively seeking lower-cost shippers and purchasing materials from suppliers closer to home. Sometimes, purchasing materials from nearshore or domestic partners may initially cost more, but lower shipping costs offset the difference.
But buying local is only one way for businesses to save on delivery and shipping. Other options include reducing deadhead miles (miles travelled without a load), focusing on larger shipments, and finding efficient shipping routes. This includes mode shifting, which occurs when shippers move shipments from one mode of transportation to another. In this case, it could mean moving freight by rail, instead of truck, since it’s more economical.
Like a pebble landing in a pond, even a small ripple can have outsized impacts.
While it’s possible to plan and account for small or temporary changes, large-scale movements can quickly hurt profits. To fight soaring prices, companies must diversify their systems and communicate with everyone in their supply chain. By staying on top of everything, companies can navigate disruptions more easily, pivot when needed, and keep products moving.
As for oil prices, no one knows when they might fall – or if they will. We’ve seen it repeatedly; small blips send costs skyrocketing in an instant, then take months to normalize.
But while we wait, supply chain managers can still make the most of the situation. All they need to do is communicate with their suppliers, distributors, and retailers, and raise the alarm when things are off. Until the situation improves, this might be the best way to manage costs and keep products moving for everyone.