Modelling the impact of disease outbreaks on the international crude oil supply chain using Random Forest regression

Abstract

Purpose

The crude oil supply chain (COSC) is one of the most complex and largest supply chains in the world. It is easily vulnerable to extreme events. Recently, the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) (often known as COVID-19) pandemic created a massive imbalance between supply and demand which caused significant price fluctuations. The purpose of this study is to explore the influential factors affecting the international COSC in terms of consumption, production and price. Furthermore, it develops a model to predict the international crude oil price during disease outbreaks using Random Forest (RF) regression.

Design/methodology/approach

This study uses both qualitative and quantitative approaches. A qualitative study is conducted using a literature review to explore the influential factors on COSC. All the data are extracted from Web sources. In addition to COVID-19, four other diseases are considered to optimize the accuracy of predictive results. A principal component analysis is deployed to reduce the number of variables. A forecasting model is developed using RF regression.

Findings

The findings of the qualitative analysis characterize the factors that influence international COSC. The findings of quantitative analysis emphasize that production and consumption have a higher contribution to the variance of the data set. Also, this study found that the impact caused to crude oil price varies with the region. Most importantly, the model introduced using the RF technique provides a high predictive ability in short horizons such as infectious diseases. This study delivers future directions and insights to researchers and practitioners to expand the study further.

Originality/value

This is one of the few available pieces of research which uses the RF method in the context of crude oil price forecasting. Additionally, this study examines international COSC in the events of emergencies, specifically disease outbreaks using machine learning techniques.

Citation

Athaudage, G.N.P., Perera, H.N., Sugathadasa, P.T.R.S., De Silva, M.M. and Herath, O.K. (2023), "Modelling the impact of disease outbreaks on the international crude oil supply chain using Random Forest regression", International Journal of Energy Sector Management, Vol. 17 No. 6, pp. 1187-1209. https://doi.org/10.1108/IJESM-11-2021-0019