Oil prices are climbing again as conflict with Iran disrupts energy markets and shipping lanes. Retailers feel that almost immediately. Fuel costs rise. Freight contracts adjust. Vendors send cost updates. Shelf tags start changing.
That part is obvious.
What I keep thinking about is the meeting that happens months later.
I have sat in more post-inventory reviews than I can count. The spreadsheet goes up on the screen. Variances get circled. The word “shrink” starts floating around the room. Someone asks what went wrong in the building. Sometimes nothing went wrong in the building.
Price spikes tied to global conflict push retail prices up. That inventory arrives at a higher cost. Then markets cool. Oil drops. Competitive pressure builds. Prices adjust downward to stay in line with the market. The product sitting in the back room does not adjust itself.
Inventory received at a higher cost now lives in a lower price environment. That gap works its way through cost layers and margin calculations. When the count comes, it shows up as paper shrink. Not theft. Not poor execution. Just retail math.
By the time inventory is booked, the pricing decisions that were set in motion are old news. The headlines about Iran have moved on. The pump price has changed three times. The store team is left answering for a number that started in a conference room months earlier.
I have watched asset protection dig into exception reports. I have watched operators defend execution. I have watched finance try to reconcile margin movement. Each group works hard in their own lane. The bottom line (and your bonus) doesn’t care about lanes.
Pricing decisions affect inventory value. Inventory value affects reported shrink. Reported shrink affects performance conversations. Those connections feel obvious when you write them down. They feel less obvious when the pricing call and the inventory call happen in separate meetings with different people.
I don’t think most organizations ignore this on purpose. It just feels distant when oil is spiking and everyone is focused on staying competitive. The accounting impact feels like something to clean up later. Later shows up fast.
If conflict in the Middle East is going to keep energy markets swinging, then price volatility is not a one-time event. It is part of the operating environment. That means inventory valuation during price drops cannot be an afterthought. It needs to be modeled, discussed, and understood before the next count.
The worst shrink conversations I have been part of were not about theft. They were about surprise. Surprise that margin moved the way it did. Surprise that the inventory number felt off. Surprise that no one connected the dots early enough.
The next inventory is already being shaped by decisions being made today.
If you are not sitting in a room right now with pricing, finance, and operations talking through how volatility will hit your next inventory, you are behind. Shrink is not just a store problem. It is a planning problem shaped by oil markets, freight costs, and pricing calls made months before the count.
We don’t need another shrink initiative. We need tighter coordination. Earlier modeling. Leaders willing to challenge the assumption that inventory will sort itself out.
The same separation that speeds up pricing decisions slows down shrink conversations.
Going with the grain says we will deal with it at inventory. Going against the grain says we deal with it NOW.