Managing the Financial Impact of Oil Price Volatility on your Medical Practice

Key Takeaways:
  • Fluctuating oil prices directly impact the cost of medical supplies, transportation and operations.
  • Healthcare providers can reduce risk by monitoring supply chains and securing stable vendor contracts.
  • Strategic budgeting and cost planning help protect your practice from rising petroleum-related expenses.

 

The healthcare industry is a lifeline for communities, delivering essential services that improve and save lives daily. But behind the scenes, an unexpected player—petroleum—plays a fundamental role in keeping hospitals, clinics and medical facilities running smoothly. From the plastics in syringes to the fuel powering emergency vehicles, oil and gas are deeply embedded in healthcare operations.

Petroleum price volatility, supply chain disruptions and sustainability concerns can impact operations and financial health.

How Petroleum Fuels Healthcare Operations

Many don’t realize just how dependent healthcare is on petroleum. Here’s how it affects daily operations:

  • Medical Supplies and Equipment
    • Plastics – IV bags, syringes, surgical tools, prosthetics and even heart valves rely on petroleum-based materials.
    • Pharmaceuticals – Petroleum-derived compounds are essential ingredients in medications, including antibiotics, pain relievers and anesthetics.
    • Medical Equipment – High-tech devices such as ventilators, MRI machines and CT scanners contain petroleum-based components critical for functionality.
  • Transportation and Infrastructure
    • Emergency Response – Ambulances, helicopters and other emergency vehicles run on gasoline and diesel, ensuring timely medical response.
    • Supply Chain Logistics – The transportation of medical supplies and pharmaceuticals depends on trucks, ships and airplanes—all powered by petroleum.
    • Backup Power – Hospitals and clinics rely on diesel-powered generators to maintain life-saving operations during outages.

How Volatility in Petroleum Affects Healthcare Costs

  • Price Fluctuations Impacting Budgeting

Oil prices rise and fall due to geopolitical events, policy changes and global supply chain disruptions. When petroleum costs surge, so do the prices of medical supplies, transportation and pharmaceuticals. For healthcare businesses, this means budgeting challenges and the potential for increased operational costs.

  • Supply Chain Disruptions Leading to Delays

A disruption in petroleum supply create bottlenecks in the healthcare supply chain. Hospitals and clinics that depend on timely deliveries of critical medical supplies may face shortages or higher costs due to transportation constraints.

  • The Push for Sustainability & Alternative Materials

As the healthcare industry looks toward sustainability, businesses are exploring alternatives to petroleum-based materials. While this transition is necessary for long-term environmental health, it presents short-term financial and operational challenges. The cost of switching to sustainable alternatives can be high, and businesses must navigate the changing landscape carefully.

What Healthcare Business Owners Can Do

While healthcare providers can’t control oil prices, they can take proactive steps to mitigate risks:

  • Monitor Supply Chain Risks

Stay informed about petroleum supply trends and their impact on medical supplies. Work with vendors who have diverse supply chains to avoid over-reliance on a single source.

  • Implement Cost-Efficient Procurement Strategies

Consider bulk purchasing or entering long-term contracts to stabilize supply costs. Strategic purchasing can help hedge against price volatility.

  • Explore Alternative Energy & Materials

Healthcare facilities can reduce dependence on petroleum by investing in energy-efficient infrastructure and exploring sustainable alternatives for medical supplies. Some hospitals are already adopting biodegradable plastics and renewable energy sources to offset costs and environmental impact.

Questions?

As a healthcare business owner, managing operational costs and financial risks is critical. At Adams Brown, we specialize in helping healthcare organizations make data-driven financial decisions that keep them resilient in the face of industry challenges. Whether it’s budgeting strategies, supply chain risk assessments or long-term financial planning, our advisors work with you to ensure your business remains competitive and financially stable.

Petroleum will continue to play a significant role in healthcare for the foreseeable future. While fluctuations in oil prices and supply chains create uncertainty, strategic planning and financial foresight can help healthcare businesses remain strong.

Contact an Adams Brown healthcare advisor if you need guidance on managing your healthcare company’s financial future.