BP Oil Company Ethical Dilemma

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Table of Contents

Introduction
Summary of the issue
How BP handled the oil spill
The outcomes of the spill
How the company can avoid similar incidents
Conclusion
Works Cited

Introduction

Business ethics is an important aspect in the attainment of organizational success. Businesses follow certain rules that govern their activities and processes in order to avoid involvement in unethical business practices. However, despite the existence of business regulations and legislation, businesses still engage in unethical practices due to factors such as negligence and financial greed (Ferrell, Fraedrich, and Ferrell 54).

In 2010, BP Oil Company was involved in an ethical incident dilemma that led to huge fines that affected the company’s bottom line (Freudenberg and Gramling 39). The BP oil spill refers to an oil spill that occurred in the Gulf of Mexico. It was so severe that it was described as the worst oil spill in the history of the United States’ oil industry. It occurred after a Deepwater Horizon oil rig exploded, sank, and spilled oil for more than two and half months (Freudenberg and Gramling 43).

The accident caused severe environmental damages and led to the demise of 11 people. According to government estimates, more than 4.9 million barrels of oil leaked into the Gulf and the effects of the spill are evident four years later. BP acted unethically because it implemented cost-cutting changes that were projected to increase profits. The company failed to implement the required safety measures that could have protected the workers and avoided destruction of infrastructure (Freudenberg and Gramling 46).

The company suffered financially for the accident by paying heavy government fines and compensating people who were affected by the spill. The company deviated from standard industry ethics and as such disregarded the risks associated with oil drilling activities (Mauer par. 4).

Summary of the issue

The BP oil spill took place in 2010 and caused severe consequences on both the environment and the lives of people living around the region. The spill’s environmental effects were so severe that the accident has been named as the largest oil spill in the history of the petroleum industry. Prior to that incident, the largest oil accident was the Ixtoc oil spill. The BP spill occurred after a Deepwater Horizon oil rig burst and sank causing oil leak that continued for 87 consecutive days (Freudenberg and Gramling 47).

According to the United States government, the incident spilled approximately 4.9 million barrels. Several stakeholders including the company and the government tried unsuccessfully to seal the leak several times. However, the leak was successfully sealed and the spill stopped after efforts by the company’s engineers. After the incident, several programs were initiated to protect natural ecosystems, estuaries, and wetlands because the oil was spreading.

The cleanup process took several months and resulted in severe environmental damages. For instance, marine ecosystems and wildlife habitats were destroyed, and the spill’s ripple effects were experienced in the fishing and tourism sectors (Freudenberg and Gramling 48). The damages caused by the spill originated from the effects of the oil on the environment and the damaging effects of the cleanup activities.

For instance, during the cleanup process, more than 4.6 million pounds of oily substances was retrieved from beaches along the Louisiana shoreline, which was among the most affected areas. The effects of the spill continued for several years after the incident.

For example, in 2013, scientists reported that dolphins and other marine animals were still dying due to the destruction on marine ecosystems that occurred after the spill. Another report released in 2014 showed that certain marine species that were exposed to the oil developed deformities that could affect their life span. Several studies were conducted to find the cause of the spill.

According to government reports, the spill was mainly caused by defective cement on the well which could not withstand the high pressure of the rig. The government blamed both Bp Oil Company and Transocean, the company that was responsible for operating the oil rig. The oil company had implemented several changes that were aimed at reducing costs and maximizing profits. The changes were insufficient because they did not include safety measures that could have prevented the accident.

The spill was an ethical issue because BP declined to act appropriately in accordance with the standards of the oil industry. According to a New Orleans federal judge, the company acted unethically based on gross negligence and misconduct that resulted from the actions taken before the spill in efforts to cut costs (Freudenberg and Gramling 51). The company’s reckless behavior led to deaths and massive fines that could have been avoided had the company implemented recommended safety measures.

After the ruling, the issue turned into a blame game with each of the involved parties blaming the other. For instance, BP blamed the operator of the oil rig, Transocean for negligence. According to the judge the three involved parties were to blame in varying degrees. 67 percent of the blame was laid on BP and 30 percent on Transocean (Landau 34). The third party, Halliburton, received 3 percent of the blame. The judge’s ruling initiated several penalties that were awarded to each of the three companies.

For instance, Transocean agreed to pay $1 billion for its negligence and an additional $400 million in penalties (Landau 34). The judge criticized the company for carelessness because the management was aware that many of its workers were unskilled in the proper use of certain equipment and application of safety measures. For instance, the workers were incompetent with regard to the use of tools that could have diverted hydrocarbons from the rig and as such prevent the explosion.

In addition, Transocean had not fixed the diverter properly, which contributed to the explosion (Landau 36). Halliburton was accused of doing shoddy cement work on the rig. According to the judge, the cement should have prevented the oil from spilling from the rig. However, it did not because the work was poorly done.

Negligence was the dominant reason attributed to the accident that destroyed people’s lives, the environment, and property. Even though BP acted unethically, it agreed to pay government fines and compensate the people who were affected by the spill. In addition to the heavy fines, the incident destroyed the company’s reputation that was already soiled by past cases of unethical and legal violations.

How BP handled the oil spill

The company handled the situation through several activities that include environmental cleanup and compensation of affected individuals. The three strategies used during cleanup included containment, dispersal, and removal (Landau 38). After the explosion, the company tried to seal the blowout preventer valves in order to stop the spill. However, their efforts were unsuccessful. After this strategy failed, the company’s personnel tried to pipe oil to a storage container but the attempt failed too.

The gas mixed with cold water and formed crystals that prevented the flow of oil into the storage vessel (Landau 37). The company also tried to use a containment system that involved pumping the oil into service vessels. This attempt was also ineffective because the rate of oil spill was double the rate of oil pumping into the vessels. After these failed attempts, the company considered using nuclear explosives. However, the option was withdrawn because it was highly dangerous and could cause total destruction of the rig.

The leak was sealed after Transocean drilled several relief wells into which the oil was pumped (Landau 41). After the oil was pumped from the well head, BP sealed the destroyed section of the flow channel using cement and thus stopped the flow successfully. Apart from stopping the spill, the company also handled the severe financial outcomes of the accident.

It paid government fines and created the Gulf Coast Claims Facility (GCCF) to compensate anyone who was affected by the spill, rectify environmental damages, and cater for response costs incurred by the federal and state governments (Landau 43). The extent of the damage was evident from the more than 220,000 claims received from people who were affected by the spill.

The outcomes of the spill

Environmental effects

The oil spill had severe environmental effects that led to destruction of wildlife, natural habitats and marine ecosystems. In addition, several lives were lost and businesses were destroyed. After the incident, studies revealed mass deaths of wildlife and marine animals (Freudenberg and Gramling 53). Birds were unable to fly because they were coated with oil and could not fly to find food. Many marine animals ingested the oil and died.

Deep water sea corals died and oil covered the surfaces of wetlands and beaches causing destruction of vegetation. Corexit was a dispersant used to clean up oil from the water. However, it led to emulsification of oil into droplets that sank into the floor of the sea causing destruction of marine ecosystems (Landau 46).

Scientists projected that the effects of the oil on birds could ultimately cause developmental and reproductive problems that could adversely affect the population of various bird species in the region (Landau 46). In addition, they argued that the oil could have destroyed microscopic microbes and planktons that form an important part of the marine ecosystem. The oil also killed fish larvae and other marine animals such as fish and turtles.

The destruction of marine animals was projected to cause gaps in species populations in future (Landau 47). For instance, a fish species known as tuna was adversely affected because the spill happened during a critical period in the species’ reproduction cycle. Numerous plant species died and the entire ecosystem was affected.

Economic and health impact

The oil spill had severe economic consequences. It affected the financial status of BP and the economic status of the Gulf Coast’s towns. BP incurred costs in the form of cleanup expenses and government fines. The cleanup process involved costly activities such as containment, drilling of relief wells, and emergency responses. Other expenses include federal costs, penalties, fines, and money paid trough claims presented by affected civilians. In 2012, the total costs of the spill were estimated at $90 billion.

The decision by the Environmental Protection Agency (EPA) to bar BP from working on government contracts affected its revenues (Landau 51). The expenses led to significant decline in the company’s revenues. The spill adversely affected the economies of communities along the gulf coast because thousands of jobs were lost. In addition, the fishing and tourism industries were affected.

For instance, the fishing industry incurred losses that were approximated at $2.5 billion (Freudenberg and Gramling 58). Several cases of individuals affected by the spill were reported in different health facilities. Among those affected were individuals involved in the cleanup process. The negative health effects were caused by the dispersant that increased the toxicity of the oil. The accident caused severe chemical poisoning that mainly affected the workers and people living near the location of the spill. Blood tests conducted on workers revealed high compositions of volatile organic compounds in their blood that originated from prolonged exposure to oil.

How the company can avoid similar incidents

The oil spill resulted from ethical and legal violations by the company (Mauer par. 2). Organizational and safety deficiencies, violation of the oil industry safety standards, and disregard for environmental conservation were some of the ethical violations cited. The company was accused of implementing cost cutting measures in order to maximize profits and ignoring the importance of implementing proper safety measures (Mauer par. 4).

BP disregarded infrastructural repairs and instead used the money intended for those purposes to boost their profits. Similar incidents can be avoided in future by implementing safety measures to protect employees, considering environmental conservation as important, and adhering to the oil industry’s code of ethics. The company violated the industry’s ethics because of the need to increase profits. The safety of the workers was compromised by failure to improve safety measures that resulted in the death of 11 workers (Mauer par. 6).

In future, the company needs to maintain high standards in implementing safety measures. In addition, it should ensure that the working conditions are safe for its workers. One of the most important aspects of business ethics is a company’s responsibility of creating safe work environments for employees. BP ignored calls by experts to identify and fix problems common with blowout preventers in the oil drilling industry (Freudenberg and Gramling 64).

The company should have improved the failsafe mechanisms in order to prevent the oil spill. In future, the company needs to conduct regular checks on its facilities in order to ensure that high safety standards are maintained. In addition, it should only employ skilled workers who are conversant with all the requirements of oil drilling and the operation of related equipment. Finally, the company should prioritize safety and environmental conservation instead of focusing on profits.

Conclusion

One of the most important aspects of business ethics is the responsibility of employers to their employees. Creating safe work environments that protect the rights of workers is important. However, certain companies sacrifice the safety of employees for the sake of increased revenues. This unethical behavior was observed in the BP oil spill that took place in 2010. The BP oil spill also known as the Deepwater Horizon oil spill refers to an oil spill that took place in the Gulf of Mexico.

It was so severe that it was named as the worst oil spill in the history of the United States. The company ignored calls by oil industry stakeholders of regular checks and repairs on its infrastructure.

The accident led to deaths and huge fines that affected the company’s bottom line. The spill had severe environmental, economic, and health effects. Had the company adhered to the industry’s ethics and implemented proper safety measures, the damages could have been prevented. The heavy government fines and penalties were the price to pay for acting unethically.

Works Cited

Ferrell, O., Fraedrich J., and Ferrell L.. Business Ethics: Ethical Decision Making and Cases. New York: Houghton Miffin College Division.

Freudenberg, W., and Gramling R. Blowout in the Gulf: The BP Oil Spill Disaster and the Future of Energy in America. New York: MIT Press, 2011. Print.

Landau, E. Oil Spill: Disaster in the Gulf of Mexico. New York: Millbrook Press, 2011. Print.

Mauer, R., and Tinsley A. Gulf Oil Spill: BP Has a Long Record of Legal, Ethical Violations. 2010. Web.

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