2. 2
British Petroleum, or BP, is one of the world's leading integrated oil and gas companies.
According to the “About BP” page on their website (2015), BP operates in more than 70
countries around the world with nearly 80,000 employees. Last year alone, they generated a
boasting $227.9 billion dollars in revenue while producing an astonishing 3.3 million barrels of
oil per day. Their values are kept simple—safety, respect, excellence, and courage; for, they
guide BP’s everyday-business and the decisions they make.
Today, society relies heavily on the energy extracted from fossil fuels on our planet. In
2012, the United States was responsible for producing 18% of the world’s total primary energy
consumption (U.S. Energy Information Administration, 2012). U.S.’s per capita energy
consumption is also higher than most countries around the world (refer to figure 1). The oil and
gas industry itself is extremely controversial because of the different processes used to extract
the limited amount of fossil fuels available to our species. According to a lecture by Rick Reed
(Personal Communication), a
Corporate Social Responsibility
professor at The University of
Colorado, until society converts to
100% renewable energy, we
essentially need companies like
BP to live the lives we do. As a
result, a lot of economical power is
granted to the industry and
because there is a limited amount of companies supplying oil, BP is considered an oligopoly.
Figure 1: Per capita energy – U.S. comparison.
3. 3
Oligopolies or monopolies are market failures in a free-market economy that occur when
a few companies control the majority or all of the market (personal communication). Companies
in this domain create limitations for civil regulators or interest groups (stakeholders who want to
change the behavior of a business) by minimizing their voice and opinions. For example, the
production of a good by a company in an oligopoly (e.g. gasoline) cannot be halted by a boycott
unless there is an alternative for that usage and until an alternative is created, companies like BP
will continue to dominate the market and dictate decisions that could impact society in a negative
way. In an industry with high entry barriers and limited competition, BP has less incentive to
make rational business decisions and fulfill interest group demands unless shareholders lose
money on their investments, an unlikely outcome in an oligopoly.
Explosions, Spillage, and the Deepwater Horizon
BP’s series of unfortunate events began with an explosion at a Texas refinery, the third
largest in the U.S., in March of 2005 (Schorn, 2006). The explosion, which occurred after a
distillation tower flooded with
hydrocarbons and was over-
pressurized, resulted in the death
of 15 workers and injury to 180
others around the facility (U.S.
Chemical Safety Board, 2007.)
So what’s the big deal? An
explosion in a highly
combustible working
environment makes sense. But according to Margaret Heffernan (2010), BP had warnings that its
Figure 2: The explosion of BP’s Texas City refinery.
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Texas City refinery was dangerous. There was evidence of reports from consultants that revealed
BP’s safety procedures were not taken seriously. Investigators later found a failure by BP to
protect the health and safety of its own workers (Heffernan, 2010).
A year later, BP was in more trouble as several thousand barrels of crude oil spilled from
a ruptured pipeline in Northern Alaska. According to Felicity Barringer (2006), the leak occurred
in a section of pipe built in the late 1970's resulting in the spillage of 267,000 gallons of crude
oil. The spill went undetected for five days before resulting in the largest oil spill to occur on
Alaska’s Northern Slope. BP claimed it was an accident and that no crime was committed.
However, a government witness claims that “BP ignored alarms that warned of the pipe’s
eventual rupture and leak” (Fisk & Coyne, 2011, para. 11). The accumulation of spillage didn’t
stop there; in September of the same year, BP says they leaked 1,000 barrels of a refined
petroleum product into the port of Long Beach, California (“The Wall Street Journal,” 2007).
Mistakes kept accumulating for BP executives and in April of 2010, they would be held liable
for one of the biggest environmental
disasters in history.
The Deepwater Horizon was a
rig on the Gulf of Mexico leased by
BP. Transocean, an offshore-drilling
company, was responsible for
operating the rig while another
company was contracted to build a
concrete core needed to seal the well for later use (Pallardy, 2015). With so many different
contracted companies working on the same job, communication and a flow of information is
Figure 3: An aerial view of the oil on the sea surface off the
Gulf of Mexico.
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crucial in order to avoid costly mistakes. Unfortunately, BP lacked this rationalization and on
April 20th, 2010, gas blasted through the core of the well because it was too weak to withstand
the pressure of the rig. This caused gas to rise to the platform of the rig where it ignited and
killed 11 workers (Pallardy, 2015). Oil proceeded to escape out of the damaged well at
uncontrollable levels. The spill lasted for 87 straight days with an accumulation of an estimated
4.2 million barrels of oil, although BP argued for 3.1 million barrels in court (Griffin, Black, &
Devine, 2015). The economical and environmental damages caused by the explosion affected
anyone near the coast including the beaches of Mississippi, Alabama, and Florida. In a company
with a history of safety failures and unethical business behavior, a disaster this impactful was
only a matter of time and sadly, little could have be done by anyone, including interest groups,
because the only people that could have prevented these accidents were the people making
internal decisions within the company.
Utilitarianism and Sustainability
Utilitarianism is defined as a consequentialist theory that demands the greatest good for
the greatest amount of people (personal communication). The focus here is on the situation and
its consequences, which ultimately determines the ethical state of the decisions taken place. If the
decisions made by BP throughout the years were evaluated through a utilitarian lens, one could
argue that their business actions were unethical. Take, for example, the lack of maintenance on
their platforms. Cutting costs on projects and not focusing on safety improvements may have
saved executives money in the short-run, but the consequence of that decision placed
stakeholders in a dangerous position. If BP did not fail to notice alarms going off that were
connected to sensors, or spent a little more on refinery improvements, perhaps the Texas refinery
explosion and the Alaskan could have been prevented. One would expect a company that is
6. 6
drilling miles into the ocean to prioritize safety over profits. Instead, thousands of people were
harmed or affected by the unethical decisions made by BP.
Sustainability is a stakeholder model that involves the three pillars of
sustainability: economical (profits), ecological (planet), and social (people) (personal
communication). I am aware every company needs profits to prosper and maintain their market
share. However, profit fixation evidently plagues a company’s decision making because they
tunnel vision their options and don’t see all of the consequences their decisions could provoke.
BP needs to incorporate the other two pillars
of sustainability into their company model in
order to prevent future accidents from
occurring. After all, they’re a billion-dollar
company with an enormous amount of
resources. Their carbon footprint grows
exponentially for every barrel of oil that they
produce due to the polluting processes used to
extract fossil fuels. Utilitarianism and sustainability go hand-in-hand—the bigger a company is
the more responsibility it should have towards their ability to help social and environment
objectives.
Moving Forward
In the case of the Deepwater Horizon, BP should have followed their values and made
safety their overall priority. It’s common sense to make sure everyone working on a project is on
the same page. Instead, they lacked rationalization and caused irreversible damage to our
environment and economy: a spike in U.S. gas prices, a brutal toll to coastal fishing and tourism,
Figure 4: The three pillars of sustainability.
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health hazards for cleaning crews and residents, billions of dollars in sunk costs, and the death of
thousands of organisms inhabiting the sea (Pallardy, 2015). But again, what price does BP have
to pay besides the governmental fines? At the end of the day, their irrationality is not punished
because of the industry they’re operating in. It’s hard to incentivize companies with a lot of
economical power. To address this issue, BP needs to change their corporate culture from
revolving around profit and cost cutting to revolve around safety and sustainability.
Conclusion
Market failures in a free market economy are unavoidable. There will always be a
company who holds more power than their opposing competition depending on the product that
is being produced. In the case of oil, BP is the third largest energy company and the fourth
largest company in the world (“Crunchbase,” n.d.). Because they are an oligopoly, the lack of
labor unions leaves interest groups with minimal voice and power to confront business decisions
being made by BP. Ideally, interest groups should work collaboratively with a company in order
to push for more transparency and enforce policies. But the truth is, companies with resources
that have the potential to
affect our entire population
are just too powerful to
incentivize (personal
communication). The role of
the government needs to
change. They need to create
and enforce higher minimal
standards for these oil companies in order to address a market-wide problem. They need to
Figure 5: BP’s Biggest Blunders.
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increase the training and funding toward regulators, as many were untrained and unprepared in
the past (Elkind, Whitford, & Burke, 2011). Higher standards should be put in place in order to
increase both the safety and sustainability of BP and companies alike. Not only does
government intervention need to change, but BP also needs to do a better job adhering to their
values of safety. They need to change their business model to reflect a more sustainable approach
in order to include the environment and society into their decision making. Self-regulation is
key—government regulations can only go so far.
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References
About BP. (2015). BP at a glance. Retrieved from
http://www.bp.com/en/global/corporate/about-bp/bp-at-a-glance.html
Barringer, F. (2006). Large oil spill in Alaska went undetected for days. The New
York Times. Retrieved from
http://www.nytimes.com/2006/03/15/national/15spill.html?_r=0
Crunchbase (n.d.). Company details. Retrieved from
http://https://www.crunchbase.com/organization/british-petroleum#/entity
Elkind, P., Whitford, D., & Burke, D. (2011). BP: An accident waiting to happen. Fortune.
Retrieved from http://fortune.com/2011/01/24/bp-an-accident-waiting-to-happen/
Fisk, M. C., & Coyne, A. (2011). BP pipeline rupture. Bloomberg. Retrieved from
http://www.bloomberg.com/news/articles/2011-11-29/bp-pipeline-rupture-may-force-
company-to-pay-more-for-2006-spill
Griffin, D., Black, N., & Devine, C. (2015). 5 years after the gulf oil spill. CNN. Retrieved from
http://www.cnn.com/2015/04/14/us/gulf-oil-spill-unknowns/
Heffernan, M. (2010). BP’s wretched safety record. Retrieved from
http://www.cbsnews.com/news/bps-wretched-safety-record-what-will-it-take-to-change/
Pallardy, R. (2015). Deepwater horizon oil spill of 2010. Encyclopedia Britannica. Retrieved
from http://www.britannica.com/event/Deepwater-Horizon-oil-spill-of-2010
Schorn, D. (2006). The explosion at Texas City. Retrieved from
http://http://www.cbsnews.com/news/the-explosion-at-texas-city/
The Wall Street Journal (2007). Timeline: BP’s woes. Retrieved from
http://www.wsj.com/articles/SB117440502039842844
U.S. Chemical Safety Board. (2007). BP America refinery explosion - investigations. Retrieved
from http://http://www.csb.gov/bp-america-refinery-explosion/
U.S. Energy Information Administration. (2015). The United States’ share of world energy
consumption. Retrieved from https://www.eia.gov/tools/faqs/faq.cfm?id=87&t=1
10. 10
Image Credits
Cover Page: Retrieved from http://www.kjeanrl.com/full-blog/2015/7/13/riverablog
Figure 1: Per capita energy consumption – U.S. comparison. Retrieved from
https://ourfiniteworld.com/2012/03/12/world-energy-consumption-since-1820-in-charts/
Figure 2: The explosion of BP’s Texas City refinery. Retrieved from
http://www.popularmechanics.com/technology/gadgets/a295/1758242/
Figure 3: An aerial view of the oil on the sea surface off the Gulf of Mexico. Retrieved from
http://www.greenpeace.org/international/en/multimedia/photos/Deepwater-Horizon---
Wellhead/
Figure 4: The three pillars of sustainability. Retrieved from
http://www.thwink.org/sustain/glossary/EnvironmentalSustainability.htm
Figure 5: BP’s biggest blunders. Retrieved from author
