Petroleum - An Analysis and Critical History - Coursework Example

? Petroleum: An Analysis and Critical History TABLE OF CONTENTS I. History……………………………………………………...…..……………………………………………..3 II. Corporate stakeholders and response to their issues………………………………….3 III. The role of the industry in its social, economic, and political setting………....4 IV. Domestic and international ethics………………………………………………………..……6 V. Ecological and natural resources………………………………………………..………….……8 VI. Social issues……………………………………………………………..………………………...………9 VII. Rating of the industry’s overall social responsiveness and its accomplishments in this area………………………………………………………………………..10 VIII. Rating the industry in relation to the Saint Leo University core values, as well as the changes that should be made to be more in line with the core values……………………………………………………………………..……………………………………..11 I. History While petroleum has been used in one form or another for thousands of years it wasn’t until the mid-19th century that it began to take on its contemporary usage. During this period methods were first developed to distill kerosene from oil as a means of creating low cost lighting. The 20th century invention and popularization of the automobile, however, would result in an explosion of growth in the petroleum industry. Modern energy demands have created a globe that has placed increasing emphasis on petroleum as the central resource powering the contemporary world. Petroleum is one of the world’s most valuable resources for the staggering amount of energy that can be attained from a small amount. With this efficiency has come technological infrastructure both in terms of consumption and production. Oil consumption is recognized to carry with it a formidable amount of concerns in terms of over-reliance, cost, and pollution. II. Corporate stakeholders and response to their issues The value of oil as a natural commodity has resulted in the development of a multi-trillion dollar multinational oil industry. In the United States this industry emerged during the early parts of the 20th century through Standard Oil. Different interpretations of this organizations’ strategic business processes exist, with some sides arguing that the organization implemented nefarious business practices, while others indicating they were part of the general capitalist spirit (Parra 2009). In either case Standard Oil developed a monopoly during the 20th century that was eventually broken up. The divided pieces now globally represent the major corporations involved in the procurement, processing, and sale of petroleum. These oil organizations argue that they are providing a valuable and necessary service to the world, as well as fulfilling their obligations to their stakeholders. Considerable controversy has arisen, however, surrounding the extent that these oil companies are acting in the best interests of the public, as petroleum has been intimately connected with large-scale environmental concerns and political strife. III. The role of the industry in its social, economic, and political setting One of the crucial truths about oil is that it is a dwindling resource. While peak oil scenarios vary among theorists, most researchers agree that in the United States oil reserves peaked in the 1970s (Deffeyes 2006). In the United Kingdom oil production has increasingly pushed suppliers into the turbulent North Sea area. In the Middle East oil has both united regions, as with Saudi Arabia, but also created incidents of severe political strife. Still, perhaps more troubling are the entrance of multinational oil firms, such as Shell and Chevron, into highly marginalized world regions such as Africa (Barsky & Killian 2004). While the infusion of capital into these regions has been welcomed, the lack of strong and developed political and cultural infrastructure has created oftentimes-unstable situations. Additionally, the multinational organizations in these regions frequently operate under less than optimal regulatory conditions (Barsky & Killian 2004). The combinatory effects of such an environment raise a number of challenging questions regarding corporate social responsibility. A number of theorists have considered many of the factors that directly contribute to political strife that arises as a direct result of petroleum acquisition and production. Zalik (2009) notes that oil is characteristically pre-informational as it is location specific. The considerable infrastructure costs surrounding this resource creates situations where an organization cannot simply decide to relocate when confronted with challenging circumstances. Such ‘boundedness’ as Zalik (2009) terms it is understood to be a major contributing factor to conflicts surrounding oil. Cameron and Palan (2004) further contend that the position of the petroleum within this paradigm of boundedness has a further contributing affect on the potential of corporate or regional deviance. Namely, offshore drilling, or production removed from social centers, holds more potential for deviance as it occurs in a region that is removed from direct and regular observation; this effectively limits adherence to institutional and social pressures. Zalik (2009) further contextualizes this argument in interpretively articulating the loosening of social constraints in these offshore settings as a metaphor on both the modern petroleum industry, as well as intra-national business operations. One recognizes that such practices, specifically related to petroleum offshore drilling, create substantial cognitive dissonance in that while political and institutional oversights may be loosened, the potential for impactful change on the social and environmental ecology remains readily apparent. Another prominent consideration regarding the impact of oil on political and economic strife is the centrality this resource plays in defining national culture and political policy. While industrialized regions such as the United Kingdom and the United States have a large amount of natural resources and gross domestic product (GDP) outputs, countries such as Nigeria lack such an expansive economy. Perhaps most pronounced is the oil rich Middle Eastern states where oil becomes such a central proposition that it structures the very fabric of political discourse. While ostensibly the Nigerian government contains majority control of oil operations in the region, researchers (Zalik 2009) note that in practice the control is situated within multinational organizations, with Shell representing the most politically connected. These political partnerships have charged and shaped much infrastructural developments and fueled resentment among marginalized identity groups. For instance, in Africa such marginalization has emerged as political elites in partnership with multinationals have favored infrastructure development in the West and North, over the Delta regions. IV. Domestic and international ethics There are a number of concerns related to domestic and international ethics. Significant environmental degradation has occurred as direct result of natural gas fires. Gas flaring began in the 1960s as Shell commenced the process as a regulations, natural gas flares in the area have occurred on a greater level than anywhere on the globe. Just as estimates regarding oil spills differ, so do estimates regarding natural gas flares. Among the most prominent perspectives agree that approximately 3.5 billion cubic feet of associated gas (AG) produced annually, 2.5 billion cubic feet is burned (Vermulen 2003). One considers that this is 70% of all natural gas (Vermulen 2003). These amounts account for the largest degree of greenhouse gas emissions worldwide. These figures are startling when one recognizes that they represent 25% of the United Kingdom’s entire natural gas consumption, and 40% of the natural gas consumption of the entire African continent (Vermulen 2003). In more regulated regions, notably the United Kingdom and the United States, natural gas flaring is discouraged as it is recognized as highly deleterious to the environment. The same practices have not been assumed in the Niger Delta, as the lax government regulations have not created institutional pressure. As such the oil companies have opted for natural gas fires as a cheap alternative to the more costly extraction process. In the world one notable aspect are ethical concerns regarding the impact of oil spills. In the developing world many of these occurrences were not directly linked to operational disasters, but were instead caused by sabotage by political groups (Mamdani 2001). In terms of the breakdown of oil spills outdated infrastructure accounts for 50% of all spills, sabotage for 28%, and 22% oil product errors or general disasters (Mamdani 2001). While the sabotage occurring in these oil spills is a unique element, one recognizes that the outdated infrastructure constitutes the most pervasive element. These oil spills have been recognized as being partially the result of the oftentimes-entangled nature of the pipes in regions such as Africa. As the oilfields are small, but multi-varied they require that considerable pipelines be built between them. This complex infrastructure creates situations where corrosion and leaks are a frequent reality. While oil producers in the United Kingdom and the United States are subject to stringent regulations and inspections, the political and economic situation in the developing world have created an environment where producers are able to operate with operational impunity. These pipes must be replaced every fifteen years to avoid risks, but in practice oil companies will go as long as twenty to twenty five years before replacing them. Shell itself has admitted that many of the pipes they constructed in the 1980s were not to contemporary standards. One considers that this admittance is tantamount to acknowledging all best efforts have not been taken to ensure the institution of adequate safety measures. These pipelines also create opportunities for sabotage, where groups and individuals are able to siphon off oil from certain sections. In addition to creating a significant theft problem, this siphoning leaves gaps in the pipelines that take weeks to months to repair. This causes significant environmental degradation. The weak governmental regulations have created an environment where the multinational oil firms are essentially required to self-regulate themselves. V. Ecological and natural resources The actions of petroleum producers have created significant short-term and long-term environmental impacts. Oil spills have perhaps had the most pronounced impacts in terms of their direct effects on the surrounding ecosystems. One of the most prominent such ecosystem impacts are on mangroves in coastal states, or even in world regions. Mangroves are tree-like root structures that grow on the coastlines surrounding water pathways. These structures are highly important to the landscape and ecosystem as they offer home and shelter to wildlife; in addition they prevent soil erosion from the coastline. The oil spills directly affect the region’s mangroves as the mangroves directly take up the released oil in their roots. This is because the oil is stored in the soil and released regularly. As one might expect, the interaction of the oil and the mangroves has resulted in significant detriment to the later, with significant mangrove populations being destroyed by oil. In addition to mangrove establishments the significant amounts of rainforest land has also been destroyed by the oil spills. Recent estimates have placed the figure at 6,232 kilometers of land (Vermulen 2003). In addition to forestry and vegetation a single oil spill can have a profound impact on the fish and related organisms. Indeed, it’s understood that one spill can seep into the groundwater and spills, be fed upon by microorganisms, who are in-turn eaten by fish that are poisoned and die from the oil. Such a process can wipe out an entire ecosystem. Operational risks are also recognized as a prominent environment concern of oil industry production. While environmental degradation as a direct result of oil has been occurring since Shell’s original entrance in the 1950s, more accurate understandings have been established from the post-1960s period. Indeed, between 1976 and 1996 statistics demonstrate that close to two million barrels of petroleum were spilled into the Niger Delta alone. The United Nations Development Programme conducted research between 1976 and 2001 and indicated that during this period close to 6,817 oil spills occurred (Vermulen 2003). In these oil spills nearly three million barrels of oil were lost; in terms of specific locations the report indicates that 69% of these spills occurred offshore, 25% occurred in swamps, and 6% occurred on land (Vermulen 2003). The World Bank counters these figures, however, arguing that since small spills are not accounted for, the annual figures could be as much as ten times more (Vermulen 2003). Baird reports have argued that 13 billion barrels of oil have been spilled into the since. Other reports have even argued that the 13 billioj barrels of oil are dramatically different from actual occurrences, as the lack of institutional oversight has created a situation where underreporting or avoiding reporting at all has become commonplace. VI. Social issues In addition to the environmental impact of oil on ecosystems, one recognizes that oil spills and natural gas fires have also detrimentally impacted the human population. While the mangrove population is discussed, the destruction of the mangroves also adversely impacts human residents. The surrounding mangroves have long served as an important source of wood for many regions in the developing world, allowing them to build home and have adequate resources for fires. In addition, the fish that emerge from the mangroves serves as an important aspect of subsistence for the residents. One of the core realities of petroleum is that while petroleum extraction may be justified on the grounds of value, the residents in many developing regions see very little of the profits, yet still face the detrimental environmental impact of extraction. VII. Rating of the industry’s overall social responsiveness and its accomplishments in this area There exists a considerable gap between written legislation and actual practice. While oil companies have acknowledged that gas flaring needs to be limited, the extent that they have continued the practice remains contested. Royal Dutch Shell and OPEC, the two biggest creators of natural gas flares, claim that only 50% of their associated gas is burnt off (Vermulen 2003). Other research agencies, however, have argued that the figures are much higher. For instance, in 2004 the World Bank reported that of all the natural gas that is produced in Nigeria, close to 75% is disposed through gas flaring (Vermulen 2003). While little progress has been established in halting the environmental impact of petroleum, some small steps have been made. One of the most prominent counteracting measures has been the process of biological remediation. Essentially bioremediation is the process of implementing biological elements as a means of counteracting oil spills. Such a process can occur during an oil spill clean up or in areas that have long been subject to degradation through oil. While the biological elements span an array of categories, some of the most prominent have been the implementation of plant life as a means of restoring the area’s natural ecology. One prominent such has been through a two-stage process. The first stage involves the implementation of the plant Hibiscus cannabinus. This plant aids in the withdrawal of hydrocarbons that had been released from the oil spills. In the second stage of bioremediation a variety of grass, Vetiveria zizanioides, is administered in the contaminated environment. The root bound nature of this species is such that it contributes to the detoxification of the soil. Modern technological methods of satellite imagery and Geographical Information Systems (GIS) have increasingly been implemented to spot problematic oil areas. Once identified, the process of bioremediation is then implemented. VIII. Rating the industry in relation to the Saint Leo University core values, as well as the changes that should be made to be more in line with the core values While to a great extent the petroleum industry does not measure up to Saint Leo University’s core values, one recognizes that there are areas where it does align. In these regards, there are many aspects of the petroleum industry that attest to hard work and dedication. For instance, the innovation that was required to devise the technology necessary to foreground petroleum use for energy was an astounding scientific achievement. Similarly, the democratic nature of the distribution of this energy throughout the globe is an essential aspect of the modern word. Still, in terms of many ethical issues, particularly those connected with environmental concerns, the petroleum industry falls short. Ultimately, for the petroleum industry to improve its core values it must place much greater emphasis on considerations for both long-term environmental sustainability, as well as the potential political fallout associated with business operations. Such changes will involve significant levels of corporate social responsibility. References Barsky, Robert B., Kilian, Lutz. Oil and the Macroeconomy Since the 1970s. Journal of Economic Perspectives—Volume 18, Number 4—Fall 2004—Pages 115–131 Cameron A and Palan R 2004, The Imagined Economies of Globalization. London: Sage Deffeyes, K, (2006). Beyond Oil: The View from Hubbert\'s Peak, Edition of book, Hill and Wang,New York. active_map_and_rankings [Accessed: Jan 29, 2012]. Falola, T, (2008), The Politics of the Global Oil Industry: An Introduction, Prager,New York.Fama, Mamdani M (2001) Beyond settler and native as political identities: Overcoming the political legacy of colonialism. Comparative Studies in Society and History 43(4):651–664 Parra, F, (2009), Oil Politics: A Modern History of Petroleum, Edition of book, I.B. Tauris, New York. Vermeulen, W. 'Global Warming and Social Innovation: The Challenge of a Climate- Neutral Society' 2003, Future Survey, 25, 9, pp. 10-11, viewed 26 January 2012. Zalik, A 2009, 'Zones of Exclusion: Offshore Extraction, the Contestation of Space and Physical Displacement in the Nigerian Delta and the Mexican Gulf', Antipode, 41, 3, pp. 557-582, Read More