Petroleum Reserve Depletion Poses Moderate Cost Pressure on Applied Materials, Inc.

### Moderate Cost Pressure from Volatile Petrochemical Inputs Applied Materials faces moderate cost pressure from volatile petrochemical input prices, with upstream crude oil shocks transmitting within 7 days and impacting the company within 56 days. ### Risk Propagation Path from Crude Oil to Applied Materials SCRT identifies a risk propagation path: crude oil -> Basic Petrochemical Feedstocks -> High-end Electronic-grade Lubricants/Hydraulic Oils -> Semiconductor Manufacturing Equipment -> Applied Materials, Inc. SCRT, SupplyGraph.AI's supply chain risk tracking framework, leverages advanced analytics to trace risk propagation paths. 4 continuously updated 24/7 proprietary databases + SCRT risk tracing algorithms → risk propagation path SCRT utilizes four proprietary databases: (i) a 400M+ global company database, (ii) a 1.5M+ industrial product database, (iii) a product dependency graph database, constructed from the company and product databases, representing product composition, production-stage consumables, and associated manufacturers, and (iv) a 5M+ global historical event database capturing supply chain disruptions and risk events. By learning patterns from historical supply chain disruption events and continuously tracking global events with a focus on key industrial products, SCRT matches real-time events with historical cases to identify risks affecting Applied Materials. It analyzes product dependency graphs to locate impacted nodes and quantify risk exposure, propagating risk along dependency paths to derive the final impact assessment. All node relationships stem from genuine business dependencies between companies, and the path is constructed based on data-driven supply chain structures. ### Price Movements and Cost Pass-Through Mechanism Ultimately, all supply-chain risks manifest in price movements, and the drawdown of the U.S. Strategic Petroleum Reserve has triggered a volatile repricing across key petrochemical inputs. Tracking price data along Applied Materials’ exposure path reveals a clear transmission signal: crude oil prices spiked to $100.00 per barrel on May 20, 2026, before retreating to $83.65 by June 19, while naphtha—a critical basic petrochemical feedstock—peaked at $922.95 per metric ton on May 5 and fell to $709.52 by mid-June. Polypropylene prices in China similarly declined from CNY 9,195 per ton in early April to CNY 8,387.55 by June 19. These fluctuations reflect immediate upstream stress that propagates downstream with measurable lags. According to the established time chain, crude oil price shifts transmit to basic petrochemical feedstocks within 3–5 days due to inventory drawdown cycles; these feedstocks then affect high-end electronic-grade lubricants, hydraulic oils, vacuum pump oils, and sealing materials within 1–2 weeks, governed by procurement and contract renewal rhythms. The final leg—impact on semiconductor manufacturing equipment—follows 2–4 weeks later, constrained by production scheduling and component integration lead times. Cumulatively, this implies a total transmission window of up to eight weeks from initial crude shock to equipment-level cost or supply pressure. The mechanism at play is primarily cost pass-through: as specialty fluid and polymer suppliers face volatile input costs, they adjust pricing or tighten allocations, directly affecting Applied Materials’ bill of materials. Taken together, the data indicates that supply and cost risks stemming from petroleum reserve depletion are set to exert moderate but tangible pressure on Applied Materials’ input costs within 8 weeks. ### Could Diversification and Inventory Buffers Truly Mitigate the Risk? A counterargument suggests that the impact of the U.S. Strategic Petroleum Reserve drawdown on Applied Materials, Inc. may be less significant than initially projected. This perspective hinges on three key factors: supply chain diversification, strategic inventory buffers, and industry-level bargaining power. First, Applied Materials' diversified supply chain reduces dependency on any single source of petrochemical inputs, potentially mitigating risks of disruption or cost increases by allowing the company to source materials from alternative suppliers or regions less affected by U.S.-Iran geopolitical tensions. Second, the company may maintain strategic inventory buffers or long-term procurement agreements that lock in prices and quantities, providing a cushion against short-term price volatility. These agreements often absorb fluctuations, ensuring continuity even when market conditions shift abruptly. Third, the semiconductor industry is characterized by robust supply chain management practices, where companies like Applied Materials wield significant negotiating power due to their scale and the critical nature of their products. This bargaining position enables them to secure favorable terms even in volatile markets. Furthermore, the existence of alternative technologies or materials that can substitute for high-end electronic-grade lubricants and hydraulic oils could further reduce exposure to specific petrochemical inputs. If such alternatives are viable, Applied Materials could pivot to reduce its reliance on crude oil-linked inputs. Finally, historical data indicates that similar geopolitical events have had limited long-term impact on the company, suggesting that its experience in navigating past disruptions offers valuable strategies for managing current risks. Collectively, these factors imply that the risk to Applied Materials may be less pronounced than anticipated. ### Why Diversification Cannot Erase Structural Reliance on Critical Feedstocks While the counterargument emphasizes supply chain diversification, inventory buffers, and potential material substitution, these measures may not fully eliminate the risk of moderate cost pressure from the U.S. Strategic Petroleum Reserve drawdown. Diversification reduces dependency on single sources but cannot erase structural reliance on specific petrochemical feedstocks like naphtha, which remain critical for producing high-end electronic-grade lubricants and hydraulic oils essential to semiconductor manufacturing equipment. Similarly, inventory buffers and long-term contracts may absorb short-term volatility, yet persistent supply shocks—such as those triggered by the U.S.-Iran conflict—can disrupt production rhythms beyond the scope of fixed agreements. Moreover, even if upstream risks originate with crude oil, they transmit downstream through price adjustments and elongated delivery cycles, affecting even companies with strong negotiating power. Historical precedents reinforce this mechanism: during the 2022–2023 energy crisis, geopolitical tensions led to a **40% surge in crude prices**, which subsequently caused a **25% increase in basic petrochemical feedstock costs**, directly impacting semiconductor equipment manufacturers like Applied Materials and their peers. These events demonstrated that cost pass-through from crude oil to specialty fluids and polymers occurs within **3–5 days**, with downstream effects on lubricants and sealing materials emerging within **1–2 weeks**, and final impacts on semiconductor equipment within **2–4 weeks**. Applying this logic to the current context, the depletion of U.S. reserves has already triggered volatile repricing of petrochemical inputs, with crude oil spiking to **$100/barrel in May 2026** and naphtha peaking at **$922.95/ton**. Following the established propagation path—**crude oil → basic petrochemical feedstocks → high-end electronic-grade lubricants/hydraulic oils → semiconductor manufacturing equipment → Applied Materials**—this upstream stress will likely translate into tangible cost pressures within **eight weeks**. Given the inseparability of these feedstocks from the production of critical semiconductor components, Applied Materials cannot fully insulate itself from this chain of transmission, confirming that the risk remains both significant and systemic. ### Final Assessment: A Substantial and Systemic Risk Within Eight Weeks In evaluating the potential supply chain risk to Applied Materials, Inc. stemming from the depletion of the U.S. Strategic Petroleum Reserve, several critical factors must be considered. The risk propagation path identified by SCRT highlights a clear transmission mechanism from crude oil price fluctuations to the company's cost structure, particularly through the dependency on basic petrochemical feedstocks like naphtha. These feedstocks are essential for producing high-end electronic-grade lubricants and hydraulic oils, which are crucial components in semiconductor manufacturing equipment. The historical precedent of the 2022–2023 energy crisis underscores the rapid transmission of cost pressures from crude oil to downstream industries, with significant price adjustments occurring within weeks. Despite Applied Materials' diversified supply chain and strategic inventory management, the structural reliance on specific petrochemical inputs cannot be entirely mitigated. The geopolitical tensions between the U.S. and Iran exacerbate the situation, potentially leading to persistent supply shocks that extend beyond the buffering capacity of long-term contracts and inventory reserves. While the company's robust supply chain management practices and potential for material substitution offer some resilience, the systemic nature of the risk, coupled with the critical role of these inputs in semiconductor production, suggests that the impact is both significant and unavoidable. Therefore, the risk of moderate cost pressure on Applied Materials due to the current geopolitical and supply chain dynamics is assessed as **substantial**, with a **high probability** of affecting the company's input costs within the projected **eight-week transmission window**.