Oil Companies: Do Oil Companies Get Big Bucks While the Rest of Us Pay $3 a Gallon - Research Paper Example

English 7 April Oil Companies: Do Oil Companies Get Big Bucks While The Rest Of Us Pay $3 A Gallon Introduction. The oil industry is one of the largest, most complex, and most important industry in the globe (Miller and Spoolman 284). The industry touches everyone’s life in one way or another whether rich or poor, from products like transportation, electricity, fuels and petrochemical products, carpets, eyeglasses and clothing. It also affects other sectors like national security, politics, elections, and international conflicts. The prices of oil are the most closely watched in the whole globe because they can lead to disaster. All countries are consumers of oil products, “but only a small set of nations are major producers of oil” (Inkpen and Moffett 6). Since the establishment of the oil industry, consumers and producers have feared that the oil will eventually run out one day. Discovering new oil reserves has been the main venture in the oil industry, because without new reserves to replace the existing ones, the industry would die. “However, measuring and valuing reserves is a scientific and business challenge because reserves can only be measured if they have value in the marketplace” ( Inkpen and Moffett 5). Oil plays a very important role in the entire global economy.The International Energy Agency predicts that the energy demand will grow by an average of 1.5% each year through 2030. Over decades the large developed economies have become major importers of oil, giving rise to challenging geopolitical issues involving producers and consumers of oil products. As a result, there is an organization that came in, to bring about equilibrium between the producers and consumers. OPEC, that is the Organization of Petroleum Exporting Countries. 2. The role of OPEC( Organization of Petroleum Exporting Countries) in oil industry. The Organization of Petroleum Exporting Countries was founded in 1960. The founders of this organization were oil producing countries such as Iraq, Kuwait, Iran, Saudi Arabia, and Venezuela. It is comprised of twelve member countries. Angola was the last country to join in 2006, and there is a speculation that Sudan will be next. Its main objective is shifting bargaining power to the producing countries, and away from the large oil companies. This was to secure the producing countries from the exploitation of those large oil companies (Inkpen and Moffett 7). The following are some of the roles played by the organization: To represent government intervention on a global scale, in oil industry related issues. Coordinating and unifying the petroleum policies that govern member countries. The organization ensures the stabilization of oil prices in order to secure efficient economic and regular supply of petroleum to consumers. The organization also ensures that there a steady income to oil producers. It also has the responsibility of ensuring a fair return on capital to those investing in the petroleum industry (Inkpen and Moffett 8). Though the organization has tried in the implementation of these roles, it has faced many challenges like disciplining the members, which has been a major problem. These challenges are the reasons for the oil industry not doing well as expected. 3. Oil Companies. Oil companies came to be as a result of a situation where oil was found, but there was no industry. The producing countries saw that there was need of foreign oil companies to produce because they did not have the necessary equipments to produce the oil. Also, the producing countries could not utilize much of the oil. There were also those who had the argument that the oil companies came due to political reasons (Marcel 37). Oil companies are of two kinds; there are the national oil companies that are state owned, that is; they are owned by oil producing countries and also the foreign oil companies that come from outside the producing country. Many oil rich countries realized that most of their expectations go unfulfilled by foreign oil companies, so they saw the need to nationalize the oil industry. The oil producing countries during the first oil shock accused the oil companies and especially the foreign oil companies, of rigging profits over the years by concealing the real figures and facts on production and price of oil (Falola 65). From the beginning, a developing country’s oil industry has been dominated especially by foreign oil companies, and the host country has struggled with the company hiring practices. The oil companies have a bad reputation of not hiring citizens of the country they operate in, but instead they bring in their own personnel to run operations; this is to prevent public criticisms because they are aware that they are exploiting the host country and their people. Those who get an opportunity to work with the foreign oil companies are employed in unskilled positions like security guards, cooks, and janitors, but they do not place the local people in influential positions (Falola 66). 4. Oil companies are making big bucks while the rest of the world is paying $3 a gallon Oil companies have been reported many times due to the continued hiking of oil prices, while the rest of the world is agonizing with these inconsiderate prices. British Petroleum is reported to have made six and a half billion dollars in twelve weeks in early 2005. Other oil companies also made massive profits at the same time. As fuel prices continue to go up, the rest of the world is at the mercy of oil companies. This system has been designed in a way that it benefits only a few, while the majority are given no choice, but to fork over more of their hard earned cash each week, in order to meet the demands of the oil companies( Fiala145). When the oil companies realize that they are not getting enough profits, they reduce the production of oil and eventually the price goes up. Again, if they realize that the demand of oil has gone down due to the high price of purchasing fuel, they increase the production of oil and thus they reduce the prices. Many oil companies and especially the foreign oil companies do not recognize better the demands of the domestic market of the host country, because they are pre-occupied with the exportation of oil to make more profits, leaving the oil producing country with a little oil to meet the demands of that country. During summers, the oil companies increase the price of oil because the demand is very high as people travel on vacations. During winter, the oil prices are also high because people require it for heating, which is very important and thus they use the stock market to push shares higher. This is proof that the price of oil is governed by greed and speculation (Fiala 146). Oil companies have taken control in all government sectors, such as in politics, making them very powerful. For example, in America, the oil companies have so much power that the leaders have no say in what they do. Oil companies have also led to other sectors hiking their prices so as meet the demands of the fuel prices and in turn it affects customers. For example, the transport industry airlines start charging for checking luggages, to find a way to pass on the biggest cost that come from the high fuel prices (Heshelow 20). 5. Solutions to the oil problem The oil problem touches each and everyones life in one way or another. As a result, people should look for possible solutions to this problem. By possible solutions, it means that people should look for alternative fuel sources. There is the need for renewable energy sources that do not pollute the environment, and at the same time, sources that do not allow people to be manipulated for profits. Nikola Tesla, an inventor and an engineer believed that there were supplies of energies that could be tapped and utilized by everyone without favoring one side (Fiala 147) A combination of energy efficiency, conservation, and renewable energy alternative will be essential to support and help humanity to move to a post oil era. This is to reduce the over dependency of the globe on oil (Smith 36). The following are some of the alternative solutions to the oil problem: Production of cars, trains, or other rapid transit system which run on solar energy, hydrogen, or even water, rather than those that use oil. This will reduce the over dependence of the humanity on oil. During winter people can shift to use of electricity or firewood to heat their homes. These alternatives are environmentally friendly. Also, those who are science, engineering, and mechanical minded must work to develop ways that discover clean energy. OPEC (the Organization of Oil Producing and Exporting Countries) should ensure that there is equilibrium between the suppliers and consumers of oil. That is, they should ensure fairness because the oil industry has been characterized by feast and famine. Feast to the oil companies and famine to the rest of the world ( Steven 2). In conclusion, the time has come when the whole world should say enough is enough. The whole system is crazy, why do oil companies pull the strings and the rest of the people are the puppets? Oil companies should not be given the chance to control people and nations in such a manner. Works Cited Alternative Institute and Smith Kimberly. Powering Our Future: An Energy Source Book for Sustainable Living. Indiana: iUniverse, 2005.Print. Falola, Toyin. The Politics of Global Oil industry: An Introduction. Westport: Greenwood Publishing Group, 2005. Print. Fiala, Karen. AlterQuest the Alternative Quest for Answers. North Carolina: Lulu.com, 2006. Print. Heshelow, Kathy. Investing in Oil and Gas: The ABC’s of DPPs ( Direct Participation Program). Indiana: iUniverse, 2010. Print Inkpen, Andrew C. and Michael H. Moffett. Global Oil and Gas Industry. Oklahoma: Pennwell Books Publishers, 2011. Print. Marcel, Valerie. Oil Titans: National Oil Companies in the Middle East. Massachusetts: Brooking Institution Press, 2006. Print. Miller, G. Tyler and Scott Spoolman. Environmental Science: Problems, Connections and Solutions. Belmont: Thomson Higher Education, 2008. Print. Steven, Paul. Strategic Positioning in Oil Industry: Trends and Options. London: The Emirates Centre for Strategic Studies and Research, 1998. Print. Read More