The impact of oil price volatility on financial performance of Saudi firms

The research examines the effects of oil price volatility on the financial performance of oil corporations and focuses on financial metrics: Return on Assets (ROA), Net Profit Margin (NPM), and Gross Profit Margin (GPM). This work employs a panel data regression analysis from 2016 to 2023 to examine the effect of oil price fluctuations on these indicators during the pre-pandemic, pandemic, and post-pandemic phases. The research furthermore examines the impact of fluctuations in oil prices on firms within the oil and various non-oil industries. The initial research indicates a positive correlation between the increases in oil prices and the enhancements in ROA, NPM, and GPM. The declines in oil prices are inversely correlated with these numbers, especially in the short term. The pandemic period exposed peculiarities due to fluctuations in oil demand and prices, which impacted the overall financial status of enterprises throughout their respective sectors and demonstrated the efficacy of risk management methods. Firms in the oil sector demonstrated greater fluctuations in performance compared to those in other industries, attributable to changes in oil prices. The document identifies risk management issues, emphasizes optimal hedging and cost control practices, and highlights the significance of adapting to environmental and geopolitical changes for enterprises. These insights are beneficial for corporations and policymakers, as they emphasize the necessity of implementing sound financial management techniques to plan for swings in oil prices and broader economic shocks.