The costs of crude oil had fallen into their lowermost ranks from the time when the similar crisis occurred in 2009 worldwide downturn, pounded by the disappearing possibility that Saudi Arabia would decide to decrease the production in order to pause the products shifting in the course of the last year.
According to the author of the article Oil Prices Plunge 5% After OPEC Stands Pat Clifford Krauss, the costs for oil throughout the world have distorted from more than a hundred and ten dollars for a barrel to less than half of this price in one year and four months.
Moreover, the author states that the oil business is winding from its most intense catastrophe since the end of the twentieth century not only on the territory of the United States but throughout the rest of the world. Not so long ago the American standard for oil prices crossed the mark of thirty-eight dollars for a single barrel. This cost appears to change drilling and carrying out shafts into a mislaying suggestion in almost every oil arena across the nation.
Furthermore, the author states that a broad diversity of issues could be responsible for the decreasing of the oil prices. As the experts claim, these factors most likely include the progression of the oil industry in America and Iraq during the past several years and a decelerating in request progress from China and other emerging nations.
Nonetheless, the final factor that has led to the price decreasing was the choice made by the Organization of the Petroleum Exporting Countries also referred to as OPEC and is controlled by Saudi Arabia and a small number of Persian Gulf associates. At the end of the autumn in 2014, the OPEC decided not to change manufacture in order to support the costs, as the similar situation frequently occurred in the past, and this decision was the one that directed the expenses into a downfall.
The OPEC claimed that before they made any decision about future production cuts, they wanted to see the impact on global markets of new barrels from Iran expected to be as many as 500,000 a day by the second half of 2016 as Tehran complies with the recent nuclear deal (Krauss, 2015, para. 8). Moreover, they proposed that Saudi Arabia could be eager to reduce the prices under the condition that the rest of the most important manufacturers were ready to implement the same strategy.
From the analytical point of view, the strategy of Saudi Arabia towards the oil prices could be evaluated as a risky move in an attempt to prove their superiority over the other leaders in this industry sector. Nonetheless, it is known that the economy of Saudi Arabia stands on the oil production, as it makes almost ninety percent of the export of the country. As a result, the implemented strategy is not safe for the economy as well as the state of business throughout the world economic arena.
As a result of this strategy, the International Monetary Fund has made the warning that their reserves possibly will end on the course of several years due to the condensed incomes and high communal expenditure they depend on in order to preserve the internal harmony, even despite the fact that the Saudi Arabia endures to possess substantial assets. This would result in shifting of the whole economic sector and the Saudis becoming the chief oils producers.
In 1960s, a league of twelve countries who are giant oil producers from Africa, Asia and America came together to form an enduring intergovernmental organization, Organization of the Petroleum Exporting Countries (OPEC) with a common objective. Four countries from Africa (Angola, Libya, Algeria and Nigeria), one from South America (Ecuador) and seven from Asia (Kuwait, Saudi Arabia, Qatar, Venezuela, Iran, the United Arab Emirates and Iraq) agreed to form an umbrella called OPEC.
Until 2008, Venezuela was a member state of this organization. These countries agreed to base the headquarters of OPEC in Vienna. Since then, Vienna has continued to accommodate OPEC meetings of oil ministers from these twelve countries. Previously, Organization of the Petroleum Exporting Countries (OPEC) had Indonesia as one of the member state.
However, Indonesia withdrew its membership from OPEC after realizing that, it had become an oil importer instead of exporting. With a population of over 400 million people, these twelve countries depend on oil as the major export commodity hence, foreign exchange. Outstandingly, oil has been a fundamental key to economic, social and political development of OPEC member states.
OPEC member states use the revenue generated from exporting oil in the expansion of their economy through a vast industrial base. Additionally, the revenue generated after exporting oil helps member state governments to fund social developments like healthcare, education, creation of jobs and increase the general living standards of the citizenry. (Organization of the Petroleum Exporting Countries, Para. 1-3).
Of course, the formation of OPEC accompanied statutes aimed at governing member countries to work within its brackets. For example, the statutes allow other countries with similar interests but oil exporters to join OPEC so long as 75% of member states voter in favor of that country. OPEC composes of three types of membership as stipulated in OPEC statutes.
Firstly, there are countries falling under founder membership. These countries held the first OPEC meeting in Baghdad, in 1960, and later on agreed to institute such an intergovernmental organization. Secondly, some countries with same interests gained full OPEC membership following their application to Baghdad conference.
The last category of membership comprises of countries that never qualified to attain full membership, but the Conference accepted them under special conditions. The paper will examine the goals and objectives of OPEC as stipulated in its statutes. (Organization of the Petroleum Exporting Countries, Para. 5-12).
The main objective of creating this intergovernmental organization was to oversee and safeguard OPEC interests both jointly and independently. The statutes sought to look for ways, which will guarantee efficient stabilization of oil prices in international oil and petroleum markets. This is because; there had been obstacles in international markets leading to price fluctuations.
Therefore, these countries read mischief in international markets and decide to act on it, with an aim of attaining steady income. OPEC member states a fair deal of the oil exported to consumer nations and that, the supply had to be regular in order to meet consumer expectations and avoid any oil price fluctuation.
Since then, there have been diverse views regarding the formation of this intergovernmental organization. This is because; OPEC became the determinant in production and pricing of oil something that did not ogre well with international consumers. For example, there have been remarkable restrictions in the international arena regarding the control of oil prices.
At times, OPEC member states especially from Arabian countries use their statutes to embarrass developed countries. For instance, during the Yom Kippur War, Arabian OPEC countries used the oil weapon strategy to stop further political intervention from the West. These restrictions regarded as oil embargo, led to the 1973 oil crisis that paralyzed the whole world.
Since then, OPEC has constantly determined the price of oil. Political explanations from OPEC member states show that, the control of oil prices came because of unilateral changes happening in the fiscal structure of the world. Thus, these countries sought to ensure that, both underdeveloped and developed countries felt the same effect when it comes to inflation matters. (Hyder, Para. 1-10).
The 1973 oil crisis created unyielding hostility between consumers of the West and OPEC member states from Asia. The oil embargoes from OPEC member states awakened developed countries to look for alternatives in oil markets. OPECs ability to manage and dictate oil prices was never to last forever. This is because; there have been recent developments of oil reservoirs in the Gulf of Mexico, some parts of Russia, Canada, and United States.
Furthermore, subsequent modernization of oil markets has seen the influence of OPEC diminish. Nevertheless, about 67 percent of oil consumed in the world, come from OPEC countries. This means, OPEC countries still manage to control international oil prices in global markets.
Establishment of Organization of Petroleum Exporting Countries (OPEC)
For over five decades now, OPEC has been a central figure in controlling global oil prices. Ironically, it is very interesting to note that, even Britain, which is the biggest world oil supplier, has no say when it comes to price control. This is because; OPEC countries disregard Britain, as it was one of the colonial masters who once proscribed the nature of oil industry. A good example of price control occurred between 1973 and 1974 at the expense of western nations.
This oil embargo led to a dramatic oil crisis, which paralyzed industries and the transport networks all over the world. The political dimension of controlling oil prices in international markets started in 1949 when Venezuela and Iran chose to form a political dispensation with Iraq, Kuwait and Saudi Arabia on oil production and pricing under the umbrella of OPEC.
Their first aim was to deliberate on new modalities and avenues of forming and maintaining mutual communication amongst nations that produce petroleum. Joining the founder members of OPEC were other oil producing countries like Libya, Algeria, Ecuador, Gabon, Qatar, Nigeria Indonesia and United Arab Emirates. (Hammes and Willis 501-504).
Oil ministers from Iraq, Iran, Saudi Arabia, Kuwait and Venezuela met in Baghdad, in September 1960 aiming to strike a common deal of escalating the price of crude oil by a certain margin in order to meet the world financial system. United States of America under President Dwight Eisenhower enacted an oil law confiscating petroleum from Venezuela and instead opted for oil coming from Mexico or Canada, an act read as mischief by Arabian countries.
The law did segregate oil imports from Persian Gulf and Venezuela by creating forced quotas hence, low prices. Under this scenario, President Eisenhower explained certain issues like the importance of oil in war, national security and ease of access to terra firma as factors of controlling oil prices. Interestingly, the enactment of this law led to a vivid downfall of oil prices in Asia.
As a sign of disgust, Venezuela President Romulo Betancourt sought to avenge this law by reaching out Arab oil producing countries. The reaching out of oil producing counties meant to seal a solid preventative strategy whose aim was to maintain the status quo (prosperity and self-sufficiency) of Venezuelas petroleum. (Hammes and Willis 507-511)
President Romulo managed to convince oil-producing countries in the Arabian region to strike a common statue leading to the formation of OPEC. Most importantly, this organization, initially started by five oil producing countries, sought to address three paramount oil measures. The fists one was to synchronize and amalgamate oil policies falling under member states and identify better ways of discouraging external monopoly.
Secondly, this intergovernmental organization, sought to address new channels aimed at stabilizing the prices of oil in international markets and confiscate detrimental trade obstacles, which always led to price fluctuation. Lastly, this cartel of oil producing Arabian countries sought after tackling irregularities in the supply of oil to shopper countries in exchange of fair return capital.
How OPEC Functions
Although sometimes influenced by politics, the determination of oil prices occurs within certain timings. For example, member countries convene a meeting at the headquarters to analyze the scenario at international oil markets. The lowering of increasing of oil price depends largely on market forecasts ranging from the demand of oil to world economic growth rates.
After thorough analysis of the two market fundamentals, OPEC Secretariat will then make informative choices starting from changing the current petroleum guiding principles.
Lowering or raising oil prices will depend on market fundamental features intended to stabilize oil prices while at the same time, maintaining its steady supply to consumers, in order to control oil demand. (Organization of the Petroleum Exporting Countries, Para. 12-14).
Oil and Politics
The whole process of controlling oil prices has some political intrigues surrounding it. For example, the doggedness of conflict between Arabs and Israel propelled the once price controlling intergovernmental organization into a forceful political icon in Middle East.
In 1967, the Six Day War, between Israel and Arab countries led to the development of a revolutionary faction, Organization of Arab Petroleum Exporting Countries, whose role was to enact and upshot new policies, which will act as revenge to western countries supporting Israel.
The situation deteriorated further, when minor oil-producing countries like Egypt and Syria joined this faction to push sanctions and mount pressure western countries. In 1973, the Yom Kippur War electrified Organization of Arab Petroleum Exporting Countries policies and strengthened their stand.
The supply of oil from western countries to Israel enabled Israel forces to triumph over Syria ns Egypt. On realizing this, Arab oil producing countries introduced an oil embargo, 1973, oil embargo, which saw United States and other western countries go without oil from Arab OPEC countries. Although not supported by other OPEC countries outside Arab land, the situation became worse hence, paralyzing production in industries and movement globally.
Nonetheless, because of the oil embargo, there was oil price decrease between 1980 and 1986 leading to oil glut in international markets. The glut caused by over-exploitation and low demand from oil consumers brought forth disunity in OPEC who suffered a 46 percent decline in revenue. (Parra 1-37).
Analysis and Conclusion
Political dissension among Arabian countries weakened OPEC political force. The Gulf War in Middle East was categorical in weakening the once powerful political front. President Saddam Hussein cited that, the increase of oil process through OPEC helped Iraq and other debt-ridden OPEC countries service their loans slickly.
OPEC infightings like the Iraq-Iran War and the invasion of Kuwait by Iraq marked a new era of OPEC conflict leading to the distraction of oil supply hence; reduction of oil prices. Nevertheless, Venezuela benefitted a lot by doing massive scaling of oil production in 1990s.
Later, President Hugo Chavez hosted OPEC summit of OPEC to discuss their achievements. Sadly, the extremist attack in United States opened a new era of wars starting from Afghanistan and Iraq invasion leading to unprecedented increase in oil prices, higher than OPEC targets.
The situation on the ground prompted Indonesia to withdraw its OPEC membership fearing production interests. There came yet another obstacle in 2007, when OPEC countries opted for a euro instead of a US dollar. This fight saw oil prices increase from US$15 to US$ 85 per barrel, in New York Mercantile Exchange, in 2008. (Smith 51-82).
Although OPEC had been successful in controlling oil prices, competition levels from other countries pose serious threat. Entry barriers in international markets provide yet another challenge to OPEC oil dominance.
Without further deliberation, about three-quarters of the worlds oil reservoirs exist in OPEC countries. There is further development going on all over the world to identify oil reservoirs. Perhaps, this will reduce the autonomy of OPEC countries that regulate oil prices whenever they choose. Non- OPEC oil-producing countries seem to benefit when oil prices increase.
Nevertheless, the small production from these countries limit the revenue generated and sometimes, this production does not even meet internal needs. What makes control of price unachievable is that, coordinated efforts from OPEC countries have policies, which discourage any legal intercession albeit, sovereignty of member states.
Market researchers and economists have failed to depict the influence of OPEC in controlling the price of oil in international markets. It is not yet conversant whether the action to increase oil prices occurs due to individual stakes or monotonous and aggressive coalitions among OPEC members or collectively as one unit in OPEC.
Overall, OPEC countries opt for classic cartel whenever they want to raise or lower oil prices. Market research shows that, OPEC members participate in deliberate production restrictions, which will increase demand of crude oil due to paucity. At this instant, the possibility of raising oil prices is actually high. Astonishingly, production of crude oil by OPEC members hit highest between 1973 and 1985 but later on reduced by 50 percent.
According to the current statistics, crude oil production from OPEC countries is extremely low as compared to what these countries were producing in 1973. Ironically, oil consumption levels have increased by 50 percent meaning, there is great demand from consumers who will in turn, meet high prices posted by semi-autonomous OPEC members. (Adelman 170-190).
As it stands, there is no signal whether OPEC member states will reduce their stance and choose to settle on a fixed oil price. The problem with OPEC countries is that, they lack proper revenue distribution modes.
Therefore, individual revenues from oil sales determine individual revenue arising from each quota. Some researchers argue that, economic and demographic disparities among OPEC member states contribute to the warring prices of oil in international markets.
Highly populated oil producing countries like Nigeria and Venezuela have high-cost oil reservoirs unlike less populated oil producing countries like United Arab Emirates, Kuwait and Saudi Arabia, which seem affluent courtesy of the high revenue generated. The future still looks gloomy as geopolitical and serendipitous OPEC episodes continue to harm international oil markets.
Nevertheless, the fixation of oil prices is sometimes god for a liberal market where oil-producing countries will receive a lion share equivalent to its production. OPEC continues to register history in the world courtesy of its unresolved price changing tactics. Through oil export, countries once considered poor are now competing with developed countries.
Works Cited
Adelman, Morris. World Oil Production and Prices: 1947-2000. Quarterly Review of Economics and Finance, 42(2), 2002, 169-191.
Hammes, David and Wills, Douglas. Black Gold: The End of Bretton Woods and the Oil-Price Shocks of the 1970s, The Independent Review, 10(4), 2005, 501-511.
BP is a multinational corporation whose main activities include exploration and trading in oil and gas. BP is the 3rd largest company in the energy sector in the world and 6th in the overall category. The company is involved in several activities within the energy sector especially exploration of gas and oil, refinery and distribution of the same, generation of power and in retailing of gas and petroleum products.
BP has also made major strides in the renewable energy sector especially in bio-fuels, wind power, hydrogen and solar energy. The parent company has its global headquarter in London.
There have been several suits brought against BP due to their negligent and unethical behavior which put both people and environment at risk. BP has had many negative incidents which have dented its social responsibility image around the globe. Some of these mistakes have had severe environmental impacts and have affected the livelihoods of several people.
There seems to be a culture of impunity within the companys top executives since some of its mistakes keep happening again and again. Needless to say the company has ended up on the negative side of several product liability suits due to accidents in its site and the use of some of its products.
These suits have been brought by people, companies and groups who have been hurt during these accidents and are demanding justice and retribution for the actions or lack of them on the part of BP.
Product Liability Suit against BP
There have been several product liability suits against BP across the world due to accidents and harm from using some of its products. But this paper considers the recent and ongoing litigation against BP due to the adverse effect occasioned by the oil spill at the Gulf of Mexico.
Recent revelations by the Orlando Sentinel have revealed a damning truth on the part of BP that the designs they used in the deep water rig were not the best for that particular purpose and location. Even more horrifying is the accusation by the sentinel that this particular design was not only inappropriate but also flawed. This conclusion was arrived at through several interviews with engineers.
This unearthed the fact that BP chose to use a design which was cheaper and unreliable. In addition to the used design, there were several mechanical blunders which should have been an indication of possible crisis. Oil specialists have singled out the Gulf of Mexico as one of the places where drilling is hard and therefore requires safer and reliable drilling methods.
BP clearly ignored all this pool of great advice and chose to place cost cutting before human safety and environmental concerns. The resulting spill, one of the largest in history, has put BP on the line of fire and is facing several product liability suits from affected people and businesses.
Due to the many product liability suits filed against BP, the plaintiff lawyers have decided to use a litigation strategy called multidistrict litigation (Ashby, 2010). This system of litigation has been used several times in the US in major litigation against major companies. This allows all cases brought against a single company to be brought to one court and be heard by one judge for the purpose of efficiency.
The major benefits are time saving mechanisms like sharing depositions and pooling resources in the process of evidence collection. This in turn reduces resource wastage in scenarios where lawyers would have to argue the same in different courts. BP recently had to pay several millions due to a similar issue in Alaska and its highly likely that they will be ordered to do so again after the completion of this product liability suits.
Mitigation against product liability suits and other crisis
Six sigma analyses should have influenced BPs management in using the right system from the start or changing it when system and maintenance problems started occurring. They should have used the data collected in this deep sea rig and in other sites to calculate the possible risk and enact the right mitigation measures.
But they dismissed most ideas brought about by renowned experts in the field, something which contradicted the sigma approach (Meredith & Schafer, 2010). They also failed to establish high standards in building the rig and hence the low standards might have caused the explosion and the escalation of the crisis.
The cause and effect ideology can be seen at work during this crisis where BPs faulty design and their unwillingness to listen became the cause of both the disaster and the great extent to which it affected the surrounding environment. Needless to say, had they being reasonable from the start, they would have prevented the current cost of redress and the subsequent product liability suits.
Crisis management has gained significance in recent times due to the ability of single crisis to erode the benefits accrued over time by a firm and cause loss of life and revenue. However, the implications of a crisis might haunt an organization as is the case of BP for a long time to come.
BP has shown that the cost of a crisis is monumental and the cost of redress is always massive. One of the risks that face companies during times of crisis is product liability cases. There is no better example than BPs recent historical settlement of a product liability case. The result is not just paying out large settlement or damages but the cost of instituting a PR campaign to rebuild the companys image.
It is not always possible to predict the occurrence of a crisis and the resultant loss that follows, but it is possible to mitigate that probability. This would ensure that should they occur, the extent to which they affect the organization and those around the affected areas wont be as drastic if no measures had been taken.
It is no wonder that many feel that BP should be punished harshly for its many blunders that cost lives and severe damage to the environment. Most academicians believe that there exist enough signals to predict the possible occurrence of catastrophe and ignoring them until its too late constitutes negligence.
It is only fare then that companies who failure to do so should be held accountable and be made to pay for the cost of repair and compensate the affected individuals. So long as companies continue to ignore mitigation by creating strong crisis management teams, then product liability suits will are here to stay.
Conclusion
This paper shows clearly that the conduct of BP was irresponsible and should be held accountable for the loss of life and the catastrophic damage to the environment. Although the company has pledged billions in rehabilitation effort, it is not enough for the people who have lost a livelihood due to the oil spill.
It remains to be seen whether the courts will rule in favor of the several plaintiffs who have filed a product liability class suit against BP. But by all indications, it would be unjust to rule otherwise in the face of such gross misconduct and negligence on the part of BP.
BP is a multinational corporation whose main activities include exploration and trading in oil and gas. BP is the 3rd largest company in the energy sector in the world and 6th in the overall category. The company is involved in several activities within the energy sector especially exploration of gas and oil, refinery and distribution of the same, generation of power and in retailing of gas and petroleum products.
BP has also made major strides in the renewable energy sector especially in bio-fuels, wind power, hydrogen and solar energy. The parent company has its global headquarter in London.
There have been several suits brought against BP due to their negligent and unethical behavior which put both people and environment at risk. BP has had many negative incidents which have dented its social responsibility image around the globe. Some of these mistakes have had severe environmental impacts and have affected the livelihoods of several people.
There seems to be a culture of impunity within the companys top executives since some of its mistakes keep happening again and again. Needless to say the company has ended up on the negative side of several product liability suits due to accidents in its site and the use of some of its products.
These suits have been brought by people, companies and groups who have been hurt during these accidents and are demanding justice and retribution for the actions or lack of them on the part of BP.
Product Liability Suit against BP
There have been several product liability suits against BP across the world due to accidents and harm from using some of its products. But this paper considers the recent and ongoing litigation against BP due to the adverse effect occasioned by the oil spill at the Gulf of Mexico.
Recent revelations by the Orlando Sentinel have revealed a damning truth on the part of BP that the designs they used in the deep water rig were not the best for that particular purpose and location. Even more horrifying is the accusation by the sentinel that this particular design was not only inappropriate but also flawed. This conclusion was arrived at through several interviews with engineers.
This unearthed the fact that BP chose to use a design which was cheaper and unreliable. In addition to the used design, there were several mechanical blunders which should have been an indication of possible crisis. Oil specialists have singled out the Gulf of Mexico as one of the places where drilling is hard and therefore requires safer and reliable drilling methods.
BP clearly ignored all this pool of great advice and chose to place cost cutting before human safety and environmental concerns. The resulting spill, one of the largest in history, has put BP on the line of fire and is facing several product liability suits from affected people and businesses.
Due to the many product liability suits filed against BP, the plaintiff lawyers have decided to use a litigation strategy called multidistrict litigation (Ashby, 2010). This system of litigation has been used several times in the US in major litigation against major companies. This allows all cases brought against a single company to be brought to one court and be heard by one judge for the purpose of efficiency.
The major benefits are time saving mechanisms like sharing depositions and pooling resources in the process of evidence collection. This in turn reduces resource wastage in scenarios where lawyers would have to argue the same in different courts. BP recently had to pay several millions due to a similar issue in Alaska and its highly likely that they will be ordered to do so again after the completion of this product liability suits.
Mitigation against product liability suits and other crisis
Six sigma analyses should have influenced BPs management in using the right system from the start or changing it when system and maintenance problems started occurring. They should have used the data collected in this deep sea rig and in other sites to calculate the possible risk and enact the right mitigation measures.
But they dismissed most ideas brought about by renowned experts in the field, something which contradicted the sigma approach (Meredith & Schafer, 2010). They also failed to establish high standards in building the rig and hence the low standards might have caused the explosion and the escalation of the crisis.
The cause and effect ideology can be seen at work during this crisis where BPs faulty design and their unwillingness to listen became the cause of both the disaster and the great extent to which it affected the surrounding environment. Needless to say, had they being reasonable from the start, they would have prevented the current cost of redress and the subsequent product liability suits.
Crisis management has gained significance in recent times due to the ability of single crisis to erode the benefits accrued over time by a firm and cause loss of life and revenue. However, the implications of a crisis might haunt an organization as is the case of BP for a long time to come.
BP has shown that the cost of a crisis is monumental and the cost of redress is always massive. One of the risks that face companies during times of crisis is product liability cases. There is no better example than BPs recent historical settlement of a product liability case. The result is not just paying out large settlement or damages but the cost of instituting a PR campaign to rebuild the companys image.
It is not always possible to predict the occurrence of a crisis and the resultant loss that follows, but it is possible to mitigate that probability. This would ensure that should they occur, the extent to which they affect the organization and those around the affected areas wont be as drastic if no measures had been taken.
It is no wonder that many feel that BP should be punished harshly for its many blunders that cost lives and severe damage to the environment. Most academicians believe that there exist enough signals to predict the possible occurrence of catastrophe and ignoring them until its too late constitutes negligence.
It is only fare then that companies who failure to do so should be held accountable and be made to pay for the cost of repair and compensate the affected individuals. So long as companies continue to ignore mitigation by creating strong crisis management teams, then product liability suits will are here to stay.
Conclusion
This paper shows clearly that the conduct of BP was irresponsible and should be held accountable for the loss of life and the catastrophic damage to the environment. Although the company has pledged billions in rehabilitation effort, it is not enough for the people who have lost a livelihood due to the oil spill.
It remains to be seen whether the courts will rule in favor of the several plaintiffs who have filed a product liability class suit against BP. But by all indications, it would be unjust to rule otherwise in the face of such gross misconduct and negligence on the part of BP.
British Petroleum [BP] is a private limited company that operates in the UK oil and gas industry. The firm was established in 1909 and has been in operation for over 100 years. BP has attained substantial growth since its inception.
Its growth has arisen from integration of effective growth strategies such as internationalisation and formation of mergers and acquisition. For example, on 21st March 2013, BP acquired 5.66% of Rosneft which is the leading oil producer in Russia (BP, 2013). The firms success has also arisen from integration of effective marketing strategies.
The UK oil and gas industry has become very challenging over the past few decades. This has arisen from changes in the internal and the external business environment. Despite the prevailing environmental changes, firms within the industry are committed towards maximising their profitability. As a result, firms are considering expanding their marketing activities by venturing into the international market.
The objective of this paper is to provide a comprehensive definition of the marketing and to illustrate how environmental factors affect international marketing process. The analysis is achieved by comparing the macro environments of China and the US which are some of the countries that BP has ventured.
Definition of marketing
Traditionally, organisation did not pay much emphasis on the element of marketing. Their main concern was on how they would sell the products that they produced. However, the concept has undergone significant transformations over the past few decades and has gained prominence. Various experts have tried to define the term marketing. According to Phillip Kotler, marketing refers to a societal process through which consumers achieve their needs by creating and exchanging products and services that are of value.
On the other hand, Peter Drucker defines marketing as the process through which organisations try to understand consumer needs and produce products that result in delivering customer value. William J. Stanton defines marketing as the sum total of various business activities such as pricing, promotion and distribution that are aimed at satisfying consumer needs. The concept of marketing is essentially aimed at enabling organisations generate their desired level of profit.
Organisations can market their products locally or in the foreign market. The process through which organisations market their products overseas is referred to as international marketing. There are various reasons that motivate organisations to incorporate international marketing.
Some of these reasons include the need to maximise the level of profit, existence of a saturated domestic market, intense competition in the domestic market and high demand in the international market. Moreover, international marketing is also motivated by existence of product life cycle differences between the local and the foreign market.
To be effective in the international market, it is important for the parties involved to select the most appropriate market entry method. Some of the methods that an organisation can select include licensing, franchising, formation of mergers and acquisition and joint ventures.
In addition to market entry, an organisation must also incorporate the most effective international marketing mix. International marketing mix is more complex compared to domestic marketing mix. Firms entering the international market must evaluate the political, cultural and economic environments in the foreign market. To survive in international marketing, organisations are required to either standardise or adapt its domestic marketing mix to the international market.
Comparison of environmental factors between China and the US
Political and legal factors
International marketing is affected by changes within the political environment. As a result, it is paramount for multinational companies to analyse the political and legal environments in the host country. Examples of issues that should be evaluated relate to the policies adopted, the system of governance and level of political stability.
Both China and the US have experienced a relatively higher rate of political stability over the past decades. The stability in the two countries has arisen from adoption of effective system of governance. The US has adopted a democratic system of governance which has led to attainment of a high level of political stability. On the other hand, China has adopted a monarchy system of government.
Collins (2013) asserts that the political risk in China is reasonably low compared to other emerging countries. However, the degree of transparency in the countrys legal and regulatory systems is relatively low compared to the US. Corina Monaghan, a renowned political analyst opines that the low level of transparency makes it challenging for multinational companies to operate in the country.
Despite the low level of transparency, China is characterised by a predictable business environment. The countries level of political stability has also arisen from minimal incidences of strikes, business interruptions, political violence and riots.
China and the US have experienced significant increment in demand for oil and gas. The daily oil consumption in China amounts to 8.2 million barrels compared to that of the US which amounts to 18.69 million barrels. In an effort to satisfy the growing oil and gas demand, the Chinese government announced a plan to adopt new oil and gas exploration policies. The policies are aimed at stimulating more oil and gas exploration companies to venture the industry (US Energy Information Administration, 2013).
Similarly, the US government passed 10 bills in 2011 that were aimed at accelerating investment in oil and gas. The US government also announced plans to commence oil drilling in Alaska and offshore oil and gas exploration at the Atlantic coast (Broder, 2011). These investments are aimed at minimising the countrys overdependence on oil and gas imports (US Energy Information Administration, 2013).
Prior to joining the WTO, marketing in China was very difficult due to existence of strict government regulations. The Chinese government required firms intending to venture the market to partner with local firms in their respective industry. Such legislations limited firms ability to undertake international marketing in China due to loss of control. On the other hand, the US economy is liberalised which makes it easy for multinational companies to venture the market.
To improve the countrys competitiveness to foreign investors, the Chinese government has over the past three decades undertaken numerous reforms in its foreign investment policies. This is likely to promote BPs operation in the international market. In summary, the two countries political and legal environments indicate the high market potential in the US and the Chinese oil and gas industries.
Economic factors
Firms in different sectors are affected by various economic changes such as fluctuation in the level of demand and supply. There are various factors that impact demand for a product or service such as the level of the consumers disposable income. Prior to entering the international market, firms management teams should evaluate the level of consumer disposable income. It is also important for marketers to evaluate the host countrys rate of inflation and the level of employment.
China and the US have undergone significant economic growth over the past decades. Despite the 2007/ 2008 economic recession, China managed to sustain its positive rate of economic growth. However, the US economy was adversely affected. Currently, Chinas Gross Domestic Product [GDP] is estimated to be $ 5.745 trillion while that of the US is estimated to be $14.6 trillion. This shows that the two economies are relatively large (US Energy Information Administration, 2013).
Chinas economic growth has emanated from various factors such as adoption of the open-door policy in the late 1970s. Additionally, the country relaxed its policies with regard to international business which is evidenced by its entry into the World Trade Organisation. This has significantly increased the number of foreign investors in China.
China and the US have relatively low rates of unemployment which average 4.3% and 9.7% respectively (Trading Economics, 2013). The two countries have also managed to maintain low rates of inflation as illustrated by figure 1 and 2 respectively. The low rate of inflation and unemployment in the two countries has significantly enhanced the consumers purchasing power. Consequently, there is a high probability of BP maximising its sales revenue by adopting effective international marketing strategies.
Figure 1: Web.
Figure 2: Web.
As a result of increment in the consumers disposable income, the citizens living standards in the two countries have improved significantly. For example, a large number of citizens in China and the US own vehicles (CNPC Economic & Technology Research Institute, 2012). It is projected that China will become the largest global economy by 2030. This presents an opportunity for BP in its international marketing efforts.
Social-cultural and environmental factors
Social trends can influence the demand of a particular product or service positively or negatively. China and the US have experienced a considerable growth in the size of their population. According to the US Energy Information Administration (2011), emerging economies such as China and India are projected to experience a robust population expansion over the next two decades.
Moreover, it is also projected that China will experience increment in energy consumption as a result of the high rate of economic growth. The demand for energy in China is projected to be higher than that of the US with a 68% by 2035 (US Energy Information Administration, 2011). Figure 3 illustrates the growth in energy consumption between China, US and India from 1990 and the projected growth in demand by 2035.
Source: (US Energy Information Administration, 2013).
Findings of a study conducted by KPMG (2012) revealed that the US is likely to experience a decline in demand for oil and gas over the next 3 years. KPMG cited the slow rate of economic recovery from the 2008 economic recession and the increase in demand for alternative sources of energy as the major factors that will lead to a decline in demand for energy in the US.
Consumers in the developed and the emerging economies such as the US and China are increasingly shifting to consumption of clean forms of energy such as electricity, biogas, bio fuel and nuclear energy. Other forms of energy that consumers are integrating include wind energy and solar energy (US Energy Information Administration, 2013). This transformation has arisen from increased knowledge and level of awareness on the importance of integrating alternative forms of energy.
For example, consumers have realised that using hydrocarbons such as petroleum based fuels as a source of energy increases the rate of global warming. This arises from the fact that petroleum based fuels increase the amount of greenhouse gases such as carbon dioxide emitted into the atmosphere. Greenhouse gases increase the rate of global warming and hence the rate of climate changes.
In their consumption process, most consumers are committed towards minimising the amount of greenhouse gases they emit into the atmosphere in order to counter the high rate of climate change (Wang, n.d) Additionally, numerous environmental conscious organisations are advocating for consumption of alternative forms of energy in order to lower the rate of environmental pollution.
These social transformations are likely to affect BPs operation in the US and Chinese markets. Consequently, the firm will be required to review its operational strategies. To survive in the long term, BP will be required to integrate the concept of Corporate Social Responsibility.
Adopting CSR will enable BP to develop a high level of customer loyalty. This arises from the fact that consumers will develop a perception that the firm is conscious of the prevailing environmental issues. This will increase the probability of BP gaining a high rate of market acceptability in the two countries.
Technological environment
The global oil and gas industry has undergone considerable growth. One of the factors that have stimulated the industrys growth relate to the high rate of technological innovation. Firms in the industry are investing in research and development in order to design technologies that can improve their competitiveness. Development computer technology is one of the aspects that have promoted the industrys growth.
China and the US have invested heavily in oil and gas exploration and refining. As a result, there is a high probability of BP experiencing intense competition in the process of marketing its products in the two countries. In addition to oil and gas exploration and refining, the two countries have managed to develop an elaborate pipeline network.
This has significantly increased the two governments competitiveness in distributing oil and gas within their boundaries. However, BP does not have an elaborate pipeline network in the two countries. Consequently, the firm is likely to experience a challenge in its marketing process.
The high rate of technological innovation in the industry has also increased the intensity of competition due to emergence of alternative forms of energy. Industry players are investing in development of renewable forms of energy such as geothermal, wind, nuclear energy and biomass amongst others.
China and the US are amongst the leading countries with regard to investment in renewable forms of energy. Consequently, the likelihood of BP experiencing intense competition in its international marketing processes in China and the US is high. To cope with the intense competition, BP should ensure that it evaluate the technological environment in order to make the necessary adjustments.
Conclusion
Marketing is one of the most important concepts that firms management teams should consider in their strategic management processes. This arises from the fact that the effectiveness with which a firm markets its products determines its success. Changes in the domestic market make most firms to consider venturing the international market.
However, international marketing is a complex task. This arises from the fact that the firm has deal with a wide range of factors that are different from the domestic market. In the course of its operation, BP has managed to attain global strategy. The firm has achieved this by incorporating the concept of internationalisation. Some of the countries that the firm has entered include China and the US.
The essay entails a comparative study of the US and the Chinese oil and gas industry. The report entails a comprehensive evaluation of the political, legal, social, economic, environmental and technological factors that are likely to affect BPs international marketing activities in the two countries.
To effectively market its products in the Chinese and the US markets, BPs management team should develop a comprehensive understanding of the two countries business environments. Additionally, the firm should ensure that it undertakes continuous review of changes within the host country. This will enable the firm to make the necessary adjustments.
One of the ways through which the firm can achieve this is by conducting continuous market research. The research should mainly focus on macro environmental factors such as the politics, economic changes, social and technological trends, legal and environmental changes.
By developing a comprehensive understanding of the macro environment in the US and China, BP will be able to achieve its internationalisation objective. This arises from the fact that the firm will formulate and implement effective international marketing strategies. As a result, the probability of the firm succeeding will be increased.
An examination of the study presented by Parkes (2012, pp. 1636-1651) reveals that the offshore petroleum/gas extraction industry is ranked among the most dangerous industries for workers due to the rather volatile nature of the extraction process (Parkes 2012, pp. 1636-1651). As Parkes (2012, pp. 1636-1651) explains, possible hazards in relation to working on an extraction platform include:
possible pump failure resulting in an explosive pressure build-up
hazardous weather conditions creating the possibility of the platform being battered by hurricane-force winds
the inherent dangers of working on a raised open platform within a constantly damp environment
various natural disasters (i.e., earthquakes, hurricanes, tsunamis, etc.)
Current estimates on the number of deaths per year within the industry vary due to a large percentage of offshore platforms often existing in countries, such as Cameroon, Equatorial Guinea, Gabon, Mexico, and a variety of other states where the regulatory environment can best be described as spotty due to the relatively lax safety regulations that are implemented in favor of increased profitability (Chakhmakhchev 2010, p. 32).
Current estimates place the number of injuries that have occurred on a global scale between 2001 to 2010at 5,281 with several dozen dead (primarily, within Mexico and the U.S.; however, due to the relatively high number of reports originating from such countries, it is not truly indicative of the sheer scale of the deaths that occur within the industry on a daily basis) (Chakhmakhchev 2010, p. 32).
Fortunately, Australia has experienced relatively few deaths within its offshore petroleum extraction industry in the period of 2008 and 2012 with incidences, primarily, isolated to these of the Western Australian Coast and those within the Victorian coast. It does not mean that the potential does not exist for a significant amount of causalities to occur.
What you have to understand is that there is a significant disparity between the workplace health, safety and protection rights between workers on offshore drilling platforms and those that work on dry land (Outlook for Australian offshore remains bright 2012, p. 42).
An examination of relevant text on the issue reveals that workers on offshore platforms are exposed to a variety of adverse work stressors which impact their ability to perform and result in a higher likelihood for accidents to occur (Offshore oil & gas developmentssnapshots from around the world 2012, pp. 1-16). These stressors can consist of the following:
problems with circadian rhythm adjustment (day and night cycle) as a direct result of shift rotations which increase the likelihood of impaired judgment and awareness;
cabin accommodations on platforms are often sparse, unsanitary and cramped, resulting in high incidences of claustrophobia and the transmission of pathogens which increase the likelihood of a person getting sick;
lack of any sufficient medical facilities/medical personnel on the platform;
2-week to 3-week offshore tours of duty which significantly increase physical and mental fatigue due to the lack of sufficient outlets for rest and relaxation;
the general noise of the environment is not conducive towards enabling proper rest, resulting in workers having notable sleep deprivation creating considerable issues related to their ability to actually work properly;
work shifts often lasting for 12 hours or more resulting in the development of considerable physical and mental fatigue;
limited shore leave and adjustment time which creates considerable work dissatisfaction;
different standard of offshore workers training resulting in a talent pool that is relatively inexperienced and often woefully undertrained to be able to do their jobs properly.
A closer examination of the health and safety standards applied to onshore workers reveals considerable differences from their offshore counterparts wherein the presence of well-stocked medical facilities, the implementation of sufficient rest times, creating shift schedules allow adequate circadian rhythm adjustment as well as longer leave periods which create relatively healthy and happy employees.
These measures result in considerable lower level of accidents as compared to that within offshore extraction platforms. Based on this, the paper will explore the reasons behind the disparity between the application of OHS between onshore and offshore workers and determine whether OHS regulations should be harmonized in order to apply to any location within the petroleum industry. This paper assumes that harmonization of OHS laws, regulations and operational standards should be implemented between onshore and offshore operations
Current OHS Legislative Environment in Relation to Offshore Drilling Platforms
It is interesting to note that when examining the OHS legislative environment surrounding offshore drilling platforms, the regulating agency in charge of it, namely, the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), has actually taken a relatively hands-off approach in policing the various offshore platforms within Australia which would create considerable dangers for workers within such industries.
Moreover, an examination of current legislation surrounding offshore petroleum industry workers shows that they are not subject to the same standards of training, regulation or access to experts within the field as found in subsequent legislative mandates that surround onshore workers.
Also, OHS laws, in general, have not been shown to significantly encompass offshore facilities and as such create a significant degree of potential OHS abuse, which can and often does happen on these platforms. The end result can only be described as an impotent legislative environment for offshore workers where their safety and security have not been properly addressed by both the policies of the Australian government and the agency that is supposed to ensure their protection.
Arguments surrounding the divergent application of OHS laws have resulted in numerous debates encompassing a variety of factors. However, it is generally agreed that the local demand within Australia for petroleum-based products is one of the reasons behind the apparently cavalier attitudes towards implementing stricter regulations for safety and protection of offshore drilling operations.
For example, current estimates of the electrical use per household within Australia show that on average, a home/apartment within the city requires roughly $1,500 per year on electricity consumption with an average daily use of 17 to 31 kWhs (Kilowatt-hours) per day or 8250 kWh per annum (Australia: Market profile, 2004: 22 23).
Such a fact calls for the production of 8 tons of carbon pollution per household created each year due to the fact that 90% of Australias energy needs are met through the use of fossil fuel-burning power plants (Australia, 2005: 39 44).
With a population density of 4,575,532 within Sydney alone, this represents literally billions of tones of carbon gases released into the atmosphere on a yearly basis. One factor to consider when taking such figures into consideration is that cities, such as Sydney, are estimated to grow to at least 6 million by 2035, resulting in an even greater strain on the citys resource infrastructure (Australia, 2005: 39 44).
This means that the use of utilities, such as electricity, will continue growing along with the amount of carbon gases released into the atmosphere, consequently reaching astronomical rates due to the increase in domestic consumption. The reason these particular facts are mentioned is the fact that they are directly responsible for the current problems in remedying the problem related to harmonizing OHS laws for onshore and offshore oil/ gas extraction.
First and foremost, it should be mentioned once again that 90% of Australian current power supply comes directly from fossil fuel resources, a great percentage of which include oil power plants (Hindmarsh & Matthews, 2008: 217 228).
As the population of Australia grows, and the demand for power increases, it has been shown by studies, such as those by Hindmarsh and Matthews (2008), that the predilection of the Australian government has been to create more fossil fuel burning power plants due to their relatively inexpensive cost in building and the fact that they have worked effectively for so long (Hindmarsh & Matthews, 2008: 217 228).
In fact, there are already even more plans to build several more fossil fuel burning power plants in order to meet the growing demand. While it may be true that governments have the responsibility in ensuring the continued safety and health of workers, the fact remains the same that in case of ever-increasing power demands in Australia, it is apparent that the needs of majority outweigh the needs of the few, and in this case, the apparent lax OHS standards within the offshore petroleum industry take less precedence over the necessity of ensuring that Australia continues to receive much-needed fossil fuel.
How else can it be explained that despite the flagrant OHS abuses by various offshore petroleum companies, their activities have continued to remain in operation? The fact is that the government can ill-afford any interruptions to Australias voracious appetite for power, stopping operations at offshore platforms that have exhibited that flagrant abuses of OHS would cause potential power crises within such cities as Sydney which would definitely be detrimental for government.
Based on this and despite numerous means of remediation or intervention, it is unlikely that any venture in harmonizing OHS laws between the onshore and offshore petroleum industry will truly succeed unless alternative forms of power are found immediately to replace fossil fuel usage; however, this is an outcome that is highly unlikely within the immediate future.
From this particular perspective, it can be seen that the legislative environment within Australia is far from conducive towards implementing regulations in favor of OHS law application on offshore oil extraction platforms. It must also be noted that there are also issues regarding the application of OHS laws on platforms which are at times not within the EEC (exclusive economic zone) of Australia, which encompasses a 200-mile radius from Australias shores.
While it is understandable to a certain extent that such platforms are not necessarily subject to Australian law given their location, some of these platforms are within the EEC, yet they are apparently generalized as belonging to the same category as those which are considered outside. There is also the fact that the workers on such platforms are Australian citizens and, as such, should be subject to the same rights as their onshore counterparts.
Harmonizing Australias OHS laws and regulations to be completely uniform covering any location
When examining the issue of harmonizing OHS laws and regulations involving any industry within the jurisdictions of the Commonwealth of Australia (including Commonwealth waters offshore) and its states and territories, you have first take into consideration the potential adverse impact if such laws remain as they are.
A brief look at the various comments and opinions regarding the latest deaths on an offshore platform on the Victorian coast reveals that many within the offshore petroleum industry at present are well aware of the inherent disparity between them and their onshore counterparts with some of the comments from current workers within the industry clearly indicating that the number of accidents will definitely increase within the coming years. However, nothing is done to improve the conditions on the offshore platforms.
Taking this into consideration, the necessity of implementing some form of harmonization becomes more apparent than it was. It must also be noted that it is highly unlike that the companies themselves which own and operate these platforms would actually implement more extensive OHS safety measures.
A brief examination of the offshore petroleum industry in general shows that there is a considerable degree of prolific cost-cutting and neglectful treatment of workers which often results in the sheer amount of accidents that have occurred within the past decade.
As such, it is thus the responsibility of the Australian government to implement equal methods of OHS laws and regulations between the onshore and offshore petroleum industries in order not only to create a certain degree of equality in operations between the two industries but to subsequently ensure that Australian workers are treated properly and in full accordance with the law.
Finding a Solution
The inherent problem with finding a solution to this issue is the fact that the problem goes far beyond just workers rights but encompasses the power needs of Australia. The fact remains that a large percentage of Australias fossil fuels are supplied by these platforms, and as such, it is necessary to continue keeping them in operation despite the inherent problems in OHS.
Another factor that should also be taken into consideration is the fact that the worker churn within the offshore petroleum industry is considerably high given the lackluster working conditions and the inherent dangers involved within the industry itself (Dickey, Watson & Zangelidis, A 2011, pp. 607-633).
This is one of the primary reasons as to why training and development programs, which are meant to ensure that only properly trained expert workers are on the platform are relatively few (Dickey, Watson & Zangelidis, A 2011, pp. 607-633).
Based on their experience, the companies that own such platforms have determined that investing into the training of workers who are going to leave soon is an inherently wasteful venture, and as such, it is their opinion that only the barest and the most necessary amount of training should be implemented in order to minimize cost and maximize profit.
The inherent problem with this particular way of operations is that it creates a considerable gap in knowledge and experience within the teams making the platforms result in a greater likelihood of mistakes.
Studies, such as those by Paterson (2011, pp. 369-389), have shown that one of the main reasons behind the relatively high rate of deaths and accidents within the offshore petroleum industry is directly related to the fact that in combination with questionable regulations which govern the industry, the lackluster method using which workers are trained contributes significantly to workplace accidents, and as such, proper training programs should not only be considered a necessity but a right by platform workers since it could in effect save their lives (Paterson 2011, pp. 369-389).
Conclusion
Based on the arguments presented within this paper, it can be stated that the harmonization of OHS laws, regulations and operational standards should be implemented in onshore and offshore operations.
Unfortunately, it has also been shown that extenuating factors involving the demand for oil, the general condition of the industry itself in the form of high churn rates and the fact that the current legislative environment surrounding the issue can be considered impotent show that it would take considerable public debate on the issue before any harmonization of laws between onshore and offshore petroleum industries can be established.
The only feasible way this paper sees this happening in the future is if a considerable loss of life due to inefficient OHS regulations on an offshore platform occurs. It is rather regrettable to take into consideration that such an event would be necessary for sufficient support for law harmonization in this particular case to actually occur.
Reference List
Australia: Market profile 2004, Energy Forecast Asia & Australasia, pp. 22-26, Business Source Premier, EBSCOhost.
Australia 2005, Energy Forecast World, pp. 39-44, Business Source Premier, EBSCOhost.
Chakhmakhchev, A. 2010, Global overview of offshore oil & gas operations for 2005-2009, Offshore, 70, 5, p. 32, MasterFILE Premier, EBSCOhost.
Dickey, H., Watson, V., & Zangelidis, A. 2011, Job satisfaction and quit intentions of offshore workers in the UK North Sea oil and gas industry, Scottish Journal Of Political Economy, 58, 5, pp. 607-633, Business Source Premier, EBSCOhost.
Hindmarsh, R., & Matthews, C. 2008, Deliberative Speak at the Turbine Face: Community Engagement, Wind Farms, and Renewable Energy Transitions, in Australia, Journal of Environmental Policy & Planning, 10, 3, pp. 217-232, GreenFILE, EBSCOhost.
Offshore oil & gas developmentssnapshots from around the world 2012, ENHESA Flash, 64, pp. 1-16, GreenFILE, EBSCOhost.
Outlook for Australian offshore remains bright 2012, Offshore, 72, 2, p. 42, MasterFILE Premier, EBSCOhost.
Parkes, K. R. 2012, Shift schedules on North Sea oil/gas installations: A systematic review of their impact on performance, safety and health, Safety Science, 50, 7, pp. 1636-1651, Academic Search Premier, EBSCOhost.
Paterson, J. 2011, The significance of regulatory orientation in occupational health and safety offshore, Boston College Environmental Affairs Law Review, 38, 2, pp. 369-389, Academic Search Premier, EBSCOhost.
Post-1945, there emerged an international oil establishment named the postwar petroleum order. Before 1939, the output of petroleum in the Middle Eastern countries was not high and the region contributed only a marginal share to the world petroleum production.
Before the postwar years, British Petroleum (BP) was the dominant player in the petroleum market however, after the war, five American companies broke BPs monopoly.
This postwar order was characterized by a corporate consolidation of the major oil companies in the Middle East. The primary aim of the order was to maximize the production of petroleum in the Persian Gulf and supply the increased postwar energy requirement of the Europe (Citino 137).
By 1948, United States had become one of the major importers of petroleum from the Middle Eastern countries. The era of Cold War diplomacy saw a rise in the energy requirement of the country, which made the rich oil resources of the Gulf indispensable to the endeavor (Painter Oil, Resources, and the Cold War 489).
The oil from the gulf was important as this provided a cheap source to help reconstructing the damage World War II had done on Europe. Further, defending the tattered Europe after the war was essential to guarantee development in the US.
The postwar petroleum order consisted of a tangible infrastructure resource to deliver oil to the European countries. The only infrastructure that supported the petroleum order then was the Suez Canal, and two other pipelines in the Middle East (Citino 137).
The political volatility of the Middle East in the postwar years only created greater problems for the petroleum order. Further, the creation of Israel in 1948 only added to the problems of the order as the Arab League members were skeptical of the Jewish nation and created a state embargo on supplying petroleum to the Western countries.
Thus, the postwar petroleum order, marred by volatility in oil supply due to regional conflict and political condition of the Gulf, was annihilated. Thus, post 1970s the United States under the administration of President Bush started diversifying the oil sources. This ended the postwar petroleum order to bring forth a new order.
This paper probes into the postwar petroleum order. Initially the paper will concentrate on delineating the reasons behind rise of the post petroleum order and the reasons that contributed to their downfall.
The paper will then discuss what the new petroleum order was and the reasons why this order came into being. Then drawing from the reasons of rise and demise of postwar petroleum order, the paper will try to intuitively understand the probable fate of the new order.
Rise and Fall of the Postwar Petroleum Order
One of the key outcomes of the World War II was postwar control over natural resources (Painter, Oil, Resources, and the Cold War 486). The prewar and postwar petroleum order saw a marked coalition between the United States and Great Britain to control the production and supply of oil in the market in order maintain stability in the oil market.
In 1944, the two countries were signatories of the Petroleum Agreement, which formally established the joint control over the oil resources of the Gulf. Thus, the emergence of an Anglo-American collaboration created a postwar oil order (Citino 139).
As early as 1933, Standard Oil of California had signed agreement with the King of Saudi Arabia, as the US oil companies were skeptical of the influence of the United Kingdom over the Saudi oil reserves due to the financial constraints of the Arab king.
In 1943, the US government survey pointed out that the Middle East had become the center of gravity and the world oil production was shifting from the Gulf-Caribbean region to the Middle East (Painter, Oil, Resources, and the Cold War 493).
Before World War II, the US government provided diplomatic support to the private US companies like Standard Oil Company of California and Texas Company, to receive concession in foreign countries. However, with the end of the war, the US government entered into an agreement with Britain to collaborate and not compete in pursuing the oil resources in Middle East.
However, this Anglo-American oil agreement was opposed by private US companies, who feared would reduce oil prices, due to cheap imports from Gulf due to government intervention (Painter, Oil, Resources, and the Cold War 493).
These issues were believed to be strong by a few members of the Congress, which resulted in a return to the Open Door diplomacy where private companies would operate in security, and profitably as government, initiative was limited to indirect involvement with oil matters in the Gulf. However, the US government had to take an active interest in the volatile political situation in the Middle East due to rise in Islamic nations.
During the World War II, Iran was occupied by the erstwhile USSR and the UK. Strategic analysts believed Iran to be vital for both the US and the USSR due to the critical geopolitical location of the country and its abundant oil resources. Right after the war, in the early forties, Iran too wanted to attract US oil companies in order ease the influence of the USSR and Britain.
US on the other hand, wanted to remove foreign influence and military occupancy in Iran, sought to influence the Iranian government to recover the natural resources.
The Truman Doctrine helped the US established its control over the northern region of Iran, Turkey, and Greece, therefore, establishing control over the eastern parts of the Mediterranean and Middle East (Painter, Oil, Resources, and the Cold War 495). This helped the country to retain control over the oil resources in the Middle East and prevented the entry of the USSR in the region.
The reason for this political move of the US was vested with two intent first was to ease off the balance of payment problems of the country through increasing business of oil through US companies in the US, and second, keeping the Soviet out of Middle East thus, establishing control, in order to establish a military base, which can launch an attack on Soviet Russia in the event of a war (Citino 140).
This was the time when there occurred all the great oil deals in order to secure the expansion of the oil supply in Middle and Near East.
The result of this was the formation of the private system of an international production management that helped in oil production in Middle East and its incorporation with the global market. The US government strategically gained control over half of the oil share in Middle East by coordinating with the large private oil companies and the oil rich Arab nations.
The postwar petroleum order was a profitable venture for the US oil companies and a political and strategic success for the US until the formation of Palestine in 1947. President Truman supported the UN plan to partition Palestine into two parts and recognize the state of Israel was the first step to offend the Arab partners.
This created an opening for the USSR to enter the Middle Eastern oil industry in 1950 and 1960s. This helped in the expansion of the automobile industry in Western Europe and Japan in between 1950 and 1970 (Painter, Oil, Resources, and the Cold War 498).
The main issue with the arrangement of the west with the Middle East arose with the rise of the question of limiting western military capability in the Middle East and the declining power of Britain. The main issue that the US faced strategically was not military threat from the USSR, rather the growth of anti-Western feeling and Islamic nationalism in the Middle East.
This instilled a fear among the US policymakers that this rise of Arab nationalism could facilitate the expansion of the Soviet in the region. Both Britain and the US wanted retain control over the Middle Eastern oil resources for strategic reasons, but disagreed on the nature of diplomacy to be used to counter the rise of nationalism in the region (Painter, Oil, Resources, and the Cold War 499).
The US was in favor of meeting the demand of the nationalists of higher share in profits from the oil industry as long as they did not post a threat to the US strategic control and the operations of the private corporate in the Middle East. On the other hand, Britains balance of payment was more dependent on the oil revenues from the Gulf and therefore, was reluctant to give into the demand of the nationalists.
The Anglo-Iranian oil venture was critical for Britain as this was its most important overseas investment and the countrys balance of payment was largely dependent on it (Painter, Oil, Resources, and the Cold War 499).
United States too shared similar apprehensions regarding the rising Arab nationalism but it was more concerned with the effect the forceful reverse-nationalization in Gulf by Britain would have on the emerging turmoil in Iran (Painter, Oil, Resources, and the Cold War 499).
The US believed any adverse move by the British would undermine the position of the Iranian shah enhancing the position of the pro-Soviet Tudeh party, and may result in an intervention from within the region. The nationalization of the Suez Canal by the Egyptian nationalist leader, Gamal Abdel Nasser, created problems for the passage of oil from the Gulf to the West, as the canal was the chief passage for the western companies.
To worsen the situation, Britain along with France and Israel developed a plan to gain control over the canal and avenge Nassers action through military retaliation. Due to this, Syria and Saudi Arabia stopped their supply of oil to these countries.
Britain and France believed that the US would help them by supplying oil during the war torn years. However, President Eisenhower refused to provide petroleum to Britain and France and threatened to cut away all aid to Israel if they did not refrain from the attack. This strong pressure from the US government helped to stop the impending war, and major oil companies supplied Europe with oil as long as the canal did not open.
The Suez crisis was a burning example to the western world the rising Arab nationalism posed to the western world. Thus, it altogether was a threat to US plans to rebuild Western Europe with the oil from the Gulf. Nasser pushed the cause of Arab nationalism to gain control of their oil resources and use to further political agenda of the Middle East.
The main aim was to reduce western dominance in their oil resources, economic development of the Arab nations who were not rich in natural resources, and annihilation of Israel (Painter, Oil, Resources, and the Cold War 501). The fear was surmounted due the mutual distrust between the USSR and the US.
The latter constantly feared that turmoil in the Middle East would open the doors for the Soviet and their allies to take control over the oil rich region, adding to their military and economic position.
The US was always skeptical of the Soviet influence in the region, and therefore, Eisenhower helped the rise of the conservative Islamists in the region to drive away communism and nationalism from the region (Painter, Oil, Resources, and the Cold War 500).
The key rout through which oil was marketed to the Western Europe was through Egypt, Syria, Lebanon, and Jordan (Painter, Oil, Resources, and the Cold War 501). For formation of the United Arab Republic through the joining of Syria and Egypt in 1958 only created additional problem to the oil route.
Further, a coup on the pro-west monarchy of Iraq through a nationalist revolution in July 1958 created additional problems. US assumed Nassers interference in the coup but refrained from any military retaliation, as it would have destabilized the situation further.
However, the leaders of the nationalist party who helped the coup, agreed to respect the agreement with US and Britain regarding oil supply from the country (Painter, Oil, Resources, and the Cold War 502).
Both the western countries sent army to Lebanon and Jordan, to reestablish control over the region (Painter, Oil, Resources, and the Cold War 502). However, the possibility of communist control of Iraq and other Middle Eastern countries posed a special problem, especially during the Cold War era.
Iraq posed a threat to the Arab nationalism and garnered support from Britain who viewed Nasser of Egypt as a greater threat. However, the US believed that communist inclination of the Iraqis could pose a greater threat to the volatile condition of the Middle East and by extension to the oil issue of the west.
With the disassociation of General Abd aI-Karim Qasim from the Baghdad Pact and his increasing association with the Iraqi Communist Party created further drift between Nasser and Qasim (Painter, Oil, Resources, and the Cold War 502). In 1961, after Kuwait gained sovereignty, Qasim declared that Kuwait was a part of Iraq.
Kuwait being the fourth largest oil producing country was the largest supplier to Britain (Painter, Oil, Resources, and the Cold War 503). If Kuwait was to become a part of Iraq, it would be an unprofitable situation for Britain and US, and so they sent troops to Kuwait to safeguard the country from Iraqi attack (Painter, Oil, Resources, and the Cold War 503).
The Arab League quickly followed suit with troops from Saudi Arabia, Jordan, and United Arab Emirates, thus helping in successful evacuation of troops from Kuwait, yet maintain control over their stakes in Kuwaits oil resoruces (Painter, Oil, Resources, and the Cold War 503). The US along with Britain aimed to annihilate the rising power of Qasim and the communist party in Iraq, and therefore brought forth the Bath Party in 1963.
With the formation of the Organization of Petroleum Producing Countries (OPEC) consisting of the major oil producing and exporting countries like Saudi Arabia, Iran, Iraq, Kuwait, and Venezuela in Baghdad in 1960 (Painter Oil, Resources, and the Cold War 504).
OPEC gained power over the prices of oil in the international market, reducing the dominance of the western oil companies to control the international oil prices; it was greatly detrimental to the goals of Arab nationalism.
Further, the breaking up of the United Arab Republic and the building of super tanks that could bypass the Suez Canal created further impediment on the nationalist agenda. Thus, it was in the 1960s that the fears of any further soviet take over of the Middle Eastern oil, almost subsided.
The New Oil Order
The postwar petroleum order thus, emerged through a continuous process of political diplomacy in the Middle East which primarily aimed at gaining control over the oil resources by the US and Britain. The US employed soft diplomacy to control the oil resources of the Middle East and their desire to keep communism away from the region led to various event, which eventually led to the demise of the order.
The aim of the US and Britain was simply to establish themselves as the leaders in oil production in the world during the postwar era (Painter, Oil and the American Century 24-26).
Some critics of American policy believe that the soft political approach of America to intervene in the Middle Eastern issues and the creation of the postwar oil order was simply a vehicle to establish American hegemony in the world (Kubursi and Mansur 8).
Britain was completely out of the political scenario by 1979, when after the gradual fall of the appeal of the Arab nationalists, there arose a wave of Islamist allegiance in the Middle East.
The Suez crisis in 1957 clearly demonstrated that the US would not deter from using force on Middle East if there was a need for it, as was pointed out by President Eisenhower in 1957: I think you have, in the analysis presented in the letter, proved that should a crisis arise threatening to cut the Western world off from the Mid East oil, we would have to use force. (Kubursi and Mansur 8).
This point of view came into effect almost two decades later in the conflict between the USSR and US on Afghan soil, after the fall of the shah of Iran to the rising Islamic forces. Many believe that hegemonic control over the Middle Eastern oil remains the source of global power for the US (Kubursi and Mansur 9).
Thus, the picture became clearer in 1973 when OPEC quadrupled the prices of oil in the wake of Israel-Arab conflict (Kubursi and Mansur 9).
Critics of American hegemony in Middle East have pointed out that the Gulf War orchestrated against Iraq in the nineties was aimed at establishing democracy in an authoritarian rule of Saddam Hussein and the western intervention aimed to safeguard Kuwait from the autocratic, illegal, invasion but the a means to control over the Kuwaiti oil resources (Frank 268).
Had the intentions of the western allies and champions of democracy been pure they would have waged similar war against South Africa for continued apartheid policy, or Iraqs invasion of Iran, or the USSRs invasion in Afghanistan (Frank 268).
Thus, evidently the reason was oil and managing some other domestic economic problems (Frank 271). Iraq was also trying to handle the economic pressure that oil industry had posed on its economy due to the recession (Billion 691).
The oil politics shaped the foreign policy of the US in the postwar era. The petroleum order then created was through soft politics, which established the private, oil companies from the US to have control over petroleum from the worlds oil rich regions.
However, with the Gulf War, political and military volatility, and increasing dependence of the US on the oil resources of the Middle East created major economic problems for US. Further, the rise of OPEC as a monopolistic controller of the oil supplies globally also posed a major problem to the hegemonic control of the US over the oil resources.
This led to the establishment of the new oil order by the Bush administration to maintain their supremacy and continue the flow of oil to the western hemisphere. The aim of the US was to look for new oil rich regions that would become sources of cheap oil.
However, the lessons from the past history of the control over oil has led to believe that even if initial control can be established over the poor, but oil rich regions, eventually they emerge as a force in the world politics undermining the hegemony of the west.
Works Cited
Billion, Phhillipe Le. Corruption, Reconstruction and Oil Governance in Iraq. Third World Quarterly 26.4-5 (2005): 685 703. Print.
Citino, Nathan J. Defending the postwar petroleum order: The US, Britain and the 1954 SaudiOnassis Tanker deal. Diplomacy and Statecraft 11.2 (2000): 137-160. Print.
Frank, Andre Gunder. Third World War: A political economy of the Gulf War and the new world order. Third World Quarterly 13.2 (1992): 267-282. Print.
Kubursi, Atif A. and Salim Mansur. Oil and the Gulf War: An American Century or A New World Order . Arab Studies Quarterly 15.4 (1993): 1-17. Print.
Painter, David S. Oil, Resources, and the Cold War. T (2010):. Leffler, Melvyn P. and Odd Arne Westad. The Cambridge History of the Cold War 1. Cambridge: Cambridge University Press, 2010. 486-506. Print.
. Oil and the American Century. The Journal of American History 99.1 (2012): 24-39. Print.
BP, with a tagline Beyond Petroleum , is a company that centers its primary goals in terms of meeting the incessantly heightening demand for fossil fuels, product advancement and transitioning to a lower carbon future. BP learnt some indispensable lessons from the Gulf War when its expansive strategies were undermined.
The lessons have since resulted into spectacular success through efficient investments, which have proved worthy, both in short and long term while also ensuring that the company has access to growth markets while being able to maximize value chains and reduce costs.
In reference to cost cutting and efficient investment, BP in order to reduce costs which was greatly being incurred in wood burning and the use of electricity, BP has resorted to using solar power. Notably, it is always encouraged that financial leadership goals must be in line with company values which in this case are mutual advantage, environmental care and constructive engagement when a company wants to cut costs.
In order to achieve these, long and short term goals such as maximization of value chains flexibility and judgments are essential as a result of imposed external events. BP is also in the process of developing a technology to capture and store carbon dioxide.
The company officials believe that carbon capture and storage is an overly pertinent contribution in light of the growing need to tackle carbon emission. Also notable is the BPs 10 point plan which can be viewed as a unique aspect of the financial strategies used by BP.
BPs 10 point plan to increase value in transparency for its shareholders is in measure to its strengths which include gas value chains, technology, relationships, giant fields and deep water. The 10-point plan also strives to build a stronger and safer company which will in turn guarantee a sustainable value for the company.
These strategies measure active portfolio management of investors, they also give insight to whether there is strong balance sheet with gearing which refers to the groups net debt plus equity in the lower half of the 10-20% range, for re-investment purposes half of incremental operating cash to be used while the other half for other purposes, new upstream projects on-stream with unit operating cash margins double the 2011 average (constant oil price $100 per barrel) and lastly generate around 50% more annually in operating cash (Dudley 1).
Statements of directors responsibilities, consolidated financial statements and notes on the same, unaudited supplementary information on oil and natural gas, board performance reports whose primary focus is to provide guidance, resources and support required by the organization are all clear proofs that the company has been able to manage its finances effectively.
Nonetheless, the annual reports on management, shareholders, directors and senior management as well as competent and skilled employees and management also prove this (BP 1). The proof can be further extracted from emphasis on creating value in a harsh environment which underlines all of BPs activities.
However, there is a need for the company to make some adjustment to the statement of the directors responsibilities. It can be noted that the statements of the accounts which give an impartial view to state of affairs.
In the same light, the relevant notes on accounts, independent auditors report which provides evidence against inadequate representation of fact through fraud or any other errors, adherence to accounting policies and standards and procedures (BP 1).
This paper reveals the case study that focuses on the explosion which happened on the Deepwater Horizon seven years ago. It was claimed to be one of the greatest disasters that led to human deaths and oil spills that affected the ecosystem adversely. Professionals argued whether the fact that British Petroleum failed to ensure safety and appropriate crisis management was the main reason for the accident. This view is analyzed in the addressed in the paper. It is also discussed how the company could have responded to the explosion and why.
Problem Statement
One of the most critical oil spill disasters related to the petroleum industry took place in April seven years ago. It occurred on a drilling rig owned by the largest company that operates within oilfield services and deals with offshore drilling, Transocean Ltd. The explosion on the Deepwater Horizon led to eleven deaths and oil leaks, resulting in enormous damages not only to human lives but also to the environment, economy, and tourism. As a consequence, British Petroleum (BP) had to deal with the biggest oil spill and financial losses at the same time. What is more, its reputation was negatively affected. Even though the company couldnt predict the explosion and prevent it, proper behavior in the framework of crisis management could have had positive influences on the observed outcomes (Ingersoll et al. 2).
BP spends much effort trying to overcome issues related to reputation damage. Still, it is only one of the consequences of the main problem. To improve the situation, the company started up a communication machine, but experts questioned its effectiveness. Thus, professionals wondered whether BP maintained crisis management properly or failed to do it. In this way, the problem was what BP should have done to enhance its crisis management and communication. Even though the company had other issues as well, this one turned out to be the most critical because it affected almost all the companys operations directly or indirectly. It influences the companys income, the source of competitive advantage, customer satisfaction and loyalty, the morale of employees, and strategic directions. In addition to that, it is connected with the way BP could have improved its performance and repair reputation to overcome financial losses and become competitive again.
Data Analysis
BP had experienced crises before the explosion that happened in 2010. For example, Wolf and Mejri emphasize the fact that it neglected safety several times (51). For example, in the middle of the 20th century, one of the oil rigs that belonged to BP collapsed, and more than ten people died. In 2005, a similar situation repeated and fifteen employees died in the fire while more than 150 of them were injured. Back then, the organization was charged, but recent events showed that it did not start paying expected attention to safety.
The oil spill was caused by the gas explosion. The very disaster started can be traced back to April 19 when the well reached more than 12,000 ft below the seafloor. The company used 51 barrels of cement, but this number was not enough to ensure a required seal. During drilling, mud was lost to the reservoir as expected but then it was pumped into tanks. However, seawater was lighter than mud and that there was not enough cement to balance the flow of gas, so it went in the drilling fluid. There are almost no doubts that the supervisors were aware of this situation, as the photo reveals that a diverter line was affected (see Exh. 1). The volume of mud continued to increase, and the recorder failed to reveal the data appropriately. However, professionals did not stop pumping at that time. When they did, the pit volume decreased at first, but it remained the same the next time and even continued to increase. The extreme pressure led to the blowout, the gas shot the water out and exploded.
This situation reveals that BP did not make the required emphasis on the value of safety when training its personnel. It was more critical for the supervisors to fulfill the task they had instead of implementing measures needed to avoid possible danger. BPs response to the crisis is not efficient.
In this way, it is also possible to claim that the population that was greatly affected by this accident included those workers who performed their duties on the Deepwater Horizon. In addition to that, the management team was affected because it had to deal with the consequences of the explosion. It was critical to resolving problems connected with organizational performance. The families of those who died that day were also influenced by the disaster because they lost a person who supported them. The companys partners could have become less willing to cooperate with it because of the possibility to be negatively affected by BPs reputation. Even the representatives of the general public had to reconsider their attitudes and loyalty.
To improve the situation, BP followed the decision of the federal government. It got engaged in the clean-up and paid attention to those people who were affected by the disaster itself or its indirect influences. The organization focused on health, safety, and welfare. It was involved in the economic recovery of those industries that were affected by the oil spill, including tourism and seafood (Ernst and Young).
In the framework of crisis management and communication, the organization faced a range of difficulties because its personnel did not know how to cope with issues that occur while operating. The company and its management team did not provide any guidance that can be used when facing an ethical issue and trying to decide whether to continue performing to fulfill the most critical goals or to focus on how potential disaster can be avoided. What is more, BP had an opportunity to resort to its previous experiences and to develop a plan that can be used to prevent the next possible crisis. In this way, BP also had a chance to avoid additional expenses. However, being responsible for numerous issues, the company had to pay more than $5 billion in 2010 and provide more than $50 million to health organizations (Wolf and Mejri 80).
There were different ways in which the problem could have been addressed. The company could have reacted to the disaster, and its consequences ignored it, or claim it to be not a BPs mistake. Still, it would have been advantageous if the organization developed a crisis management plan for its employees to follow in any situation that might affect safety anyway.
Key Decision Criteria
Trying to identify which alternative to following, BP should have thought of the way each of them dealt with the issues observed by the organization. Thus, attention should have been paid to the possibility to restore the reputation and enhance financial performance. All in all, it can be presupposed that it would have been better for the company to respond to the disaster immediately because in this way it could have improved the situation better than other options.
Alternatives Analysis
BP could have reacted to the oil blowout, claiming that it was an accident. The organization could have tried to make its stakeholders believe that there had been no sights of an issue that might have led to the explosion. In this way, BP could have made others believe in its innocence and ensured that it had done its best while operating. As a result, the company would have lost a relatively small part of its clients. However, some partners and customers might start thinking that BP is not experienced enough and that its performance is poor so that it is better not to cooperate with it. Still, proving gross negligence, the organization had an opportunity to avoid expenditures connected with the necessity to support the ecosystem.
BP might have tried to claim that the disaster happened because of other parties. If it had conducted some research to collect information that can prove at least some errors made by other organizations, BP would have been able to make them compensate the affected people. In this way, the company would not only save its money but also improve its reputation, attracting clients back. Still, this option would have entailed a range of ethical issues.
Finally, BP could have resorted to the third alternative. It could have reacted to the explosion immediately, accepting its fault for the inability to ensure safety. The company should have interacted with other professionals to develop a range of initiatives that were likely to reduce negative influences provided on the ecosystem. They should have maintained research and developed a long-term plan to enhance the environment and provide full payment for those people who were affected. In addition to that, BP should have focused on the possibility to advertise seafood and tourism industries that were negatively affected by the explosion. All in all, this initiative could have been the most appropriate one because it addressed all critical issues and avoided ethical dilemmas.
Recommendations
To respond to disasters appropriately, BP needs to develop a working crisis management plan that can be resorted to by the staff members who face critical situations. Considering the discussed case, the organization should create an infrastructure that can be utilized to deal with possible leaks. It should be based on deep-sea oil wells that are used by BP. With the help of the absorbent wall, the company is likely to prevent further issues of this kind.
It will be a great advantage for BP to gather an emergency response team. This group of professionals should patrol that wall and ensure its efficiency. Needless to say, that such a team is to contain well-experienced professionals who have all required theoretical knowledge and skills that can be used in practice.
In the framework of crisis communication, the company should pay much attention to its stakeholders. Transparency should be discussed as a tool to attract clients and restore their loyalty. BP should take responsibility for all those issues that occurred due to the mistakes it made and the inability to ensure safety. Even sincere apologies may be enough to improve the situation greatly. In this way, the company should hire a spokesperson who can easily get in touch with numerous clients.
The company should also reconsider the use of social media because it has already proved to be a great type of communication that can be approached without any significant issues. Unlike a personal website, social media allows the company to avoid constant reconsideration of the discussed disaster, and negative feedback regarding it is also likely to be reduced in this way.
Finally, the organization may consider the possibility to develop some kind of disaster website so that if some crisis occurs, professionals have an opportunity to reach it and inform the population regarding the possibility of crises (McMasters).
Action and Implementation Plan
To implement changes, following the results of data analysis, it can be claimed that BP should have done the following:
Collect the oil that was spilled during the disaster;
Address experts in the sphere to develop the most advantageous solution initiatives;
Point out the way BP would respond to the consequences;
Establish trust-based relations with stakeholders, sharing information about the accident;
Cooperate with the government to minimalize negative influences on other industries;
Provide compensations to families of those employees who died;
Gather a group of professionals to focus on such issues;
Improve safety standards;
Provide training;
Enhance security system;
Promote tourism;
Develop initiatives to improve the ecosystem.
Exhibits
Exh. 1: A Gas Flare Coming from a Diverter Line (Aeberman)
Works Cited
Aeberman. What Caused the Deepwater Horizon Disaster? The Oil Drum, 2010, Web.
Ernst and Young. Deepwater Horizon Accident and Response. BP, 2014, Web.
Ingersoll, Christina, et al. BP and the Deepwater Horizon Disaster of 2010, 2012, Web.
McMasters, Michael. Analysis of Situation/Background. LinkedIn, 2015, Web.
Mejri, Mohamed, and Mohamed Mejri. Crisis Management: Lessons Learnt from the BP Deepwater Horizon Spill Oil. Business Management and Strategy, vol. 4, no. 2, pp. 67-90.
Wolf, Daniel, and Mohamed Mejri. Crisis Communication Failures: The BP Case Study. Management Journal, vol. 2, no. 2, pp. 48-56.
This project focuses on the CovOil multinational Oil and Gas Company.
The company is in need to recover from the past financial losses.
The disaster claimed the lives of 8 personnel with other damages being incurred by the companys extensive offshore platforms.
As a result, the company had to cover for the disaster damages and still be able to carry out normal business operations.
Some of the measures the company undertook after the damage involved the acquiring of additional oil reserves (Kerzner 2013).
Acceptance criteria for the project
There is need to have Seismic survey for reserve identification, 3 deviated well and vertical poles that can act as petroleum reservoir (Hillson 2003).
Block stations that incorporate the procurement, delivery and installation fields.
3 Storage terminals and access roads. Other project requirements include field camps and meeting with the stakeholders.
Project milestones
The license of the presidents approval has mandated project execution without any delay, current favourable oil price and the organization CEO; Mark Jason has showed a positive response to the project materialization.
To avoid any social dispute that may arise in the future, specifically once the project has been practically and fully initiated (Meredith & Mantel 2006).
The vertical wells are important for POD calculation, which is the point of deviation.
The storage terminal serves as crude oil storage facilities. The access roads to allow for easy site accessibility and products transportation.
Projects Assumptions and constraints
The disasters impact that occurred has greatly affected the financial status and limits the projects investment capabilities on the companys side.
The government is likely to be involved in additional cost sharing to actualize the project. Large lucrative projects that entail financial gain require the full participation and inclusion of the involved counties (Aven & Vinnem 2005).
The net cost of the project has affected both time and material price fluctuations. The cost calculations of majority of the materials have been calculated for one year duration and are approximately 90 million dollars.
Project Breakdown structure (Aven & Vinnem 2005).
Reference List
Aven, T & Vinnem, JE 2005, On the use of risk acceptance criteria in the offshore oil and gas industry, Reliability Engineering & System Safety, vol.90, no.1, pp.15-24.
Hillson, D 2003, Using a risk breakdown structure in project management, Journal of Facilities Management, vol.2, no.1, pp.85-97.
Kerzner, HR 2013, Project management: A systems approach to planning, scheduling, and controlling, John Wiley & Sons, New York.
Meredith, JR & Mantel, SJ 2006, Project Management: A Managerial Approach, 6th edn, John Wiley & Sons, New York, NY.
