ethical issues of petroleum industry

TOPICS COVEREDExecutive SummaryBritish Petroleum Company BackgroundOperations Locations and Business SegmentsEthical Dilemmas Deepwater Horizon Prudhoe Bay Oil SpillAnalysis of the dilemmas using various theoriesImage recovery programs Alternative Energy Program Emission Reduction ProgramReferences

Executive Summary The focus of this report is an analysis of BPs actions, identifying and evaluating its ethical dilemmas. It will include general information about the company, identification and evaluation of ethical dilemmas based on the recent oil spills happened in Prudhoe Bay and Deepwater Horizon. To achieve some clarity, both dilemmas will be observed from the different stakeholders perspectives. Furthermore, in the dilemmas evaluation phase, various theories will be used to determine whether BPs actions were ethical or unethical, using a relatively straightforward cost-benefit analysis. Finally, BP programs for preserving the natural environment and scarce resources for the future generations which were launched after companys realization of its unethical behaviour will be discussed in the last part.In summarizing, it could be said that the report will shed more perspectives on these serious issues and could help the reader to have a better understanding on the problem as well as options for action to solve the issue.Company BackgroundBritish Petroleum is one of the worlds largest integrated energy companies, operating in all activities which are connected with the oil and gas industry, which include exploring and producing, refining, distributing and marketing these products to the world market. It is also heedful of the renewable sources of energy, for instance, wind and solar power (BP, 2012). Every day, BP produces almost four million(3,8 million) barrels of crude oil and natural gas, with market capitalization of 135 billion, revenue of 386 billion, and 83 thousand employees in 2011, operating in more than 100 countries and owning 27,800 service stations (BP, 2012). All of these attest that BP is amongst the worlds most important multinational corporations. Operations Locations and Business SegmentsBP's world headquarters in St. James's, City of Westminster, LondonBP has operations in around 80 countries worldwide[135] with the global headquarters in England, located in the St James's area of London.[136] As of November 2013, the company had a total of 83,900employees.[4] Operations by location The company operates out of the following major locations - United Kingdom, Ireland, United States, Africa, Asia, Australia. Caucasus and the Caspian region, Europe (ex. United Kingdom and Ireland), North America (ex. United States), South AmericaMain business segmentsThe company is involved in the following business segments exploring oil and natural gas, oil refining and marketing, producing alternative and low carbon energy.The Ethical Dilemmas of BPThe definition of Ethical dilemma, states that it is a situation that happens when two or more social work morals are in conflict. BP scandals, like the environmental pollution and the unsafely performance conditions discovered during the Prudhoe Bay and Deepwater Horizon oil spills. These dilemmas have impacted on BP stakeholders. The Deepwater Horizon

BPs Drilling platform in the Gulf Mexico, had an explosion on April 20th, 2010, which caused the largest oil spill catastrophe in the petroleum industry history. In the accident 11 men working in the rig were killed, and 17 others suffered injuries. More than 150 thousand barrels of crude oil gushed into the sea, every day, for almost 5 months. Up to 68 thousand square miles of the Gulf's surface were covered (Burdeau, Cain, 2010). There were many problems that contributed to the explosion on the rig, discovered during the investigation of the oil spill by many non-governmental and governmental organizations that proved BPs unethical behaviour led to the disaster. But the main reason is that the recommended decision by Halliburton, one of the largest multinational corporations, providing oilfield services, was not to install an oil platform. In spite of the recommendations and warnings, BP continued the installation of a drilling rig, even using the cheaper well design that some investigators considered as risky.There is no doubt that many parties were affected, directly, or indirectly, with this environmental disaster. Everyone who works in the seafood or tourism industries was obviously affected. The pollution that led to the mutating and the killing the fish, put workers at the risk of losing their jobs, subsequently, increasing seafood prices, affecting the restaurant and supermarkets industry, as well. Moreover, the tourism sector was affected because people refrained from going to the beaches covered in oil, staying away from water sports, or other fun attractions, meaning all those involved in tourism, such as hotels, tour operators, restaurants, boat renting companies were affected with the oil spill (BP, 2012). Likewise, after the blow-out in the Deepwater Horizon, the profit figures showed disappointing results, falling to 35 percent, as the result of increased expenditures and obligations for individual compensation and penalties, thus losing revenue. It has damaged BP reputation and finances , losing the faith" of investors and stockholders (Beam, 2010). Moreover, besides losing investors, the company also started to lose customers. There was a boycott campaign that started in the social media. Thus, the Facebook society gathered more than 75 thousand users who were negative towards BP. The massive oil spill also had the negative influence on gasoline stations, affiliated with the oil company. For example, petrol stations in middle Tennessee were facing boycotts from clients who were upset with the continuous spill (Hayslip, 2010). In spite of the recommendations and warnings, BP continued the installation of a drilling rig, even using the cheaper well design that some investigators considered as risky.

Another owner of a BP station in Chicago had a 20-percent fall in sales at his filling station during the disaster (Gutierrez, 2010). Lastly, the absence of the professional behaviour by Tony Hayward, the CEO of BP at that time, could be observed, prejudicing the ethical behaviour of BPs social responsibility. People could see how he was enjoying a yachting holiday during the crisis, which created a negative image on the whole administration of the company (BBC, 2010).After the blow-out in the Deepwater Horizon, the profit figures showed disappointing results, falling to 35 percent. It has damaged BP reputation and finances , losing the faith" of investors and stockholders

Prudhoe Bay oil spill

In late February, 2006 an explosion and subsequently oil spill happened in Prudhoe Bay, Alaska, releasing 267 thousand gallons (1 million litres) of crude oil in the tundra of the Alaskas North Slope. However, it was discovered only after 5 days. The disaster was the largest oil spill in the history of this region. A pipeline corrosion problem was a cause of the rupture and leaking of oil. The corroded pipeline was detected two years before the catastrophe and the London headquarters were informed, however, they did not pay enough attention to correct the problem (National geographic, 2010). The oil spill significantly influenced many groups and institutions both positively and negatively. Firstly, gasoline consumers were extremely affected. The cleaning cost was paid by BP, thus leading to increase in the price of oil by $2.22, closing at US$76.98 for each barrel. Besides that, the accident created a shortage on the Alaskan gasoline market because of the closing of the Prudhoe Bay oil facility, which produced, approximately, 2.6% of the US demand for petroleum, again affecting the oil-product users negatively. Moreover, the oil spill impacted other oil-producing companies. Additional limitations were imposed on the areas where companies can drill, reducing the total amount of demanded oil, requiring additional extraction from other. Also, there are numerous new restrictions on oil drilling and production in the future and new regulations in the form of Clean Water Act, the Clean Air Act and the Pipeline Safety Act. The corroded pipeline was detected two years before the catastrophe and the London headquarters were informed, however, they did not pay enough attention to correct the problem

This spill damaged the corporate image of British Petroleum, impacting the shareholders, employees and its technologist. BP shares decreased in price, almost 2 percent. BP employees and people in the nearest communities began to report about their health, complaining on the symptoms such as often having headaches and chest pains, resulting from the clean-up and released chemicals into the environment (Taylor, 2010). Furthermore, the clean-up techniques have not been useful at cleaning up the pollution. Moreover, BP technologists were criticized for over-sighting the corrosion problem, giving them incentive to find better and faster way of determining and stopping leaks in pipelines (Klein, 2010). Other party includes scientists because this incident has given greater motivation for them to discover new ways of cleaning an oil spill, such as bacteria that eats the oil and to research the renewable sources of energy. Finally, knowing that North Slope region of Alaska is home to thousands of migratory birds, caribou, and other habitants the spill had an enormous effect on the environment. The oil spill covered, approximately, over two acres of snow-covered tundra and hard-frozen lake. Only the cold conditions made it easier to clean up the area, affected by the oil spill (Rosen, 2006).Analysis of Deepwater HorizonFrom the BP oil catastrophe, the oil spill in the Gulf of Mexico in 2010, arises the dilemma between the saving costs by unnecessary risks taken and meeting safety criteria in the terms of large number of fatalities on the platform rig. The individualistic business theory states that the only obligation for a company is to make a profit. The company can do whatever it takes to make a profit, as long as they stay within the legal boundaries. In this case, BP did not do anything unethical because the accident was a result of mechanical failure. A specific part, a cement shoe barrier, failed to use the reservoir to contain hydrocarbons which eventually led to the explosions. If the employees knew of this and did not do anything to fix it, it would be considered unethical behaviour. But since they had no knowledge of what was happening, they did not do anything unethical. The stakeholders in this case are the company, their employees, and the customers.The utilitarianism theory says that a company should keep happiness to themselves and happiness to others at a balance. No party should be happier than the other, to keep things fair. The two parts that make up utilitarianism are egoism (maximizing happiness in the business) and altruism (maximizing happiness in others). In the case of the BP Oil Spill, BP did not make themselves happy nor their customers. The company lost billions of dollars on wasted oil, paying for clean-ups, and donations they made as a result of the spill. This money could have been used for something like upgrading their machinery or investing it in another company, where they could potentially make money out of it.

The Kantian theory of business consists of four parts. They are that businesses should act rationally, help others make rational decisions, respect people, and make decisions based on goodwill. BP did not follow these four rules. They did not respect people (employees and customers) because they did not take the necessary steps to make sure the equipment was up to date and in good condition. This shows that the company would rather save time and money than to ensure the safety of their employees. They disrespected their customers because after their incident at Texas City, they said they would improve on their workplace safety which they clearly did not. This shows how they are not true to their word so the customers lose their trust in them. The company clearly was not making decisions out of goodwill because they were just trying to save time and money by not going through the correct safety procedures.

The Virtue Theory states that in order for a business to function properly, they must obey virtues such as honesty, courage, justice, and self-control, to name a few. BP did demonstrate honesty and courage because they had the courage to admit to the public their wrongdoing. They were not honest in the fact that they did not test out their equipment correctly, and went on using it like they did, but after the accident happened they did admit to it. They did not try putting the blame on subcontractors or the manufacturer of the part that broke, which they easily could have if they wanted to avoid some of the heat. BP was ethical in the product they offer to the customers. BP has consistently been one of the top sellers of oil based products, which proves that their product is not cheap or bad quality. After this spill, customers changed their opinion of the company more so than the product They did not respect people (employees and customers) because they did not take the necessary steps to make sure the equipment was up to date and in good condition.

Overall, BP made the majority of their mistakes in the actual incident. They made mistakes that led up to the explosion happening. If they followed their correct safety protocols this incident could have been completely avoided. To prevent further accidents, I would recommend that the company hires a manager of some sort to collect physical reports of the employees testing out the parts before putting them to use. These reports will be much more credible than verbal confirmation of the quality check of the parts. If they happen to find parts that are not up to standards, they can then notify the manufacturer of the part to prevent them from making more defective parts. This will make the overall process much more effective for both the company and the manufacturer. They can also develop universal procedure for when accidents like this happen. If they came up with and put to use a strategy that they know will work, it will save vital time in crucial situations like this when oil is being poured into the ocean.Analysis of Prudhoe Bay oil spill The Alaskan Oil spill arises the dilemma, the negligence of the companys board of directors, together with saving money and the unnecessary risk that seriously affected the environment. We can use the utilitarian theory to comprehend, whether it was moral or immoral. No utilities were provided for this oil spill, neither to BP, nor to the society. Firstly, because BPsnegligent actions, cost the company a large sum of money, up to $20 million dollar fine. Secondly, it harmfully affected the environment of the Alaskas natural environment, home to numerous animals and birds. In the long-run it can lead to the extinction of one of the species, disinheriting future generations of seeing the beauty of our world. Next, BP accepted the fine, suffered damages of losing the revenue because of the stopping the operation line and large amount of oil wasting, together with the large expenses for the cleaning up. Furthermore, it increased oil prices that are harmful for the society and for the countys economy as well, because oil products, such as petrol are inelastic products that are difficult to substitute. The benefits, described are all indirect. First of all, because people became more concerned about the consumption of renewable sources of energy, allowing to pay more attention and investment in research and development actions. Moreover, it required the technologist to find better methods to determine leakage in the pipelines, that in long-term will play a significant role in the preventing other oil spills. Finally, owing to the spill, society and the government have become more aware of BPsnegligence towards the environment, employees and the security of their assets, thus implementing new policies, restriction and rules for the gas and oil industries that will help to avoid many environmental and safety performance issues of BP and other companies. The alternative actions that BP could have implemented in this situation, were to consider employees concerns about the corrosion in the pipeline and to take appropriate measures to remedy the defects in it

The alternative actions that BP could have implemented in this situation, were to consider employees concerns about the corrosion in the pipeline and to take appropriate measures to remedy the defects in it. In this case company could avoid many problems, such as huge fines, damaged image, unnecessary expenses, without hurting the environment and the US petrol market. These could relate to the benefits of this action. The only cost would be the expenditures to renew the pipeline. To sum up, renovation the pipeline in the right time could ensure BP in the consistent profit and supply for the American market, making BP actions unethical.BPs attempts to recover its imageAlternative Energy Program After the serious disaster in the gas and oil, BP tried to recover its image. Nowadays, stakeholders are more concerned about toxic emissions, rising gas prices and pollution that create a very unpleasant picture of the oil industry as a whole. Therefore, BP has started a campaign to focus more on global warming and greenhouse emissions, supporting the right of future generations for the clean environment, together with the saving the natural scarce resources for later uses. We are all citizens of one world, and we must take shared responsibility for its future and for its sustainable development ~ John Browne, BP ex-CEO.

First, British Petroleum changed its name to BP and raising the range of alternative energy being offered to the market. John Browne, ex-CEO of BP proclaimed (BP, 1998) that we are all citizens of one world, and we must take shared responsibility for its future and for its sustainable development. BP has become the first world global energy company to acknowledge the problem of climate change. Secondly, in 2005, BP launched its Alternative Energy Program. The company sees itself as going green by expanding its business and becoming more profitable to do so, going beyond the oil and gas, investing money in the biofuels, wind and solar production sectors. For example, in biofuels, BP produces ethanol, using the feedstock of sugar cane from Brazil. In addition, it is developing technologies in order to use the energy of grasses as a source of the lignocellulose ethanol (BP, 2010). For this program BP investments constitute of $8 billion until 2015, $5 billion of which has been already invested for acquiring a Brazilian biofuel company and another Brazilian producer of sugar and ethanol that can produce 480 million litres of ethanol per an average of year (BP, 2012). Moreover, the company invested over $500 million for the past 10 years in the Energy Biosciences Instituted, where leading scientists find new and more efficient ways to produce biofuels (BP, 2012). All of these enable BP to become the leader in the production of biofuels. Furthermore, BP embraces wind power, which is playing a significant role in the recovering its image, because wind power is clean, safe, renewable and could remove approximately one billions tons of carbon dioxide each year. Today, BP possesses eight wind farms that generate more than 1,200 megawatts, providing electricity to a city with a population of 700 thousand people (BP, 2012). The company sees itself as going green by expanding its business and becoming more profitable to do so, going beyond the oil and gas, investing money in the biofuels, wind and solar production sectors

Emission Reduction Program The world consumption of natural oil and oil products increases every year, showing a growth of 2.7% on average every year and the production of carbon dioxide, reaching 34 billion tones in comparison to 23 billion in 2000 (Joint Research Center, 2012). Therefore, in 1998, BP chose the strategy for reducing the amount of greenhouse gases emitted in to the atmosphere from its operations over the coming ten years, regardless of the companysgrowth. By the tackling the problem of global warming, BP has the advantage to become more ethical in relating to society, doing its moral duty of protecting the welfare and the environment from its own harmful gases emission regardless of its costs. BP support policies stress the efficiency of the production and use of energy, because the amount of energy used can have an effect on carbon dioxide emissions. Also, BP concentrates on the support of lower-carbon, high-promotional energy methods, such as solar and wind energy. Finally, BP invests in technology research and innovations that could create lower-carbon options for the future (BP, 2011). In 2012, BP invested $3.4 million in the Clean Air Agency for projects directed at emission reductions in Whatcom, Skagit or Island counties of Washington state in the U.S. (Schwarts, 2012). In 2011, BP participated in the Australian debate on climate change, cooperating with other government and non-government organizations, in order to realize and impose potential policy solutions. BP actions led to creating the clean energy legislative package, where they shared its analysis of world energy projections, business impacts in nations where have been already imposed carbon prices and knowledge of renewable sources of energy. To sum up, after 10 years BP could manage to achieve their intentions and decrease the production of carbon dioxide by 10% (BP, 2009). It can reduce emissions by almost 80 million tonnes, owing to, combining better technologies, with simple operation efficiencies, such as stopping leaks and eliminating the unnecessary burning of natural gas. The reduction can come from various developments, which included the use of new technology, clean and renewable sources of energy and the elimination of flaring. All of these testify that BP does it duties towards the society about caring the environment and preserving it to the future generations. BP can reduce carbon dioxide emissions by 80 million tonnes by combining better technologies with simple operational efficiencies such as stopping leaks and burnings of natural gas.

Referenceshttps://www.academia.edu/7563817/BP_ethical_issues http://wearedevelopment.net/2012/05/18/is-bp-an-ethical company/http://www.bp.com/en/global/corporate/investors/annual-reporting.html