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BUSINESS 8

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Theproblems that have befallen the oil giant BP from 2001 to 2006 canlargely be attributed to the company’s negligence and lack ofcommitment, as well as assumption of warning that later turned out tobe massive accidents. The company failed to follow the ethics it hadset since its inception of ensuring safety of its oil refineries andpipelines. It is evident from the reading that the company’s mainaim was to reduce cost. However, unfortunately, the companycompromised on the quality of the safety measures that it wassupposed to put in its refineries and pipelines. The readinghighlights various instances where the company compromised on thequality of the set standard safety measures in order to save on cost.Such negligence has cost the company billions of dollars of shillingsto date (Gordon, 2007).

BP’sethics were also questionable in this reading. For instance, itraises various questions on the reasons why BP was funding somepolitical parties, which evidently must have been favoring thecompany. Since the company stopped funding political activities andpolitical parties, its position in the oil industry starteddwindling. According to the CEO of the company in 2002, Lord Browne,funding political parties and political activities had proved to beineffective over the years. An incident in 2001 also raised variousquestions on the ethical standards of BP’s management (Gordon,2007).It is asserted in the reading that BP admitted to having some privateinvestigators, who the company had hired to check on Greenpeace andThe Body Shop. Such instances raised numerous ethical issues inregard to the honesty of the company in its transactions. This raisedquestions on the company’s commitment to safeguarding theenvironment.

Theunfortunate events that BP faced from 2005 until 2010 can beattributed to the company’s negligence. These incidents havedestroyed the company’s image across the world since then. TheTexas City Refinery explosion left more questions than answers. Thenegligence by the company to install standard safety measures in thecompany willingly has been viewed as an act of negligence, which ledto the explosion. According to OSHA, BP had violated numerous safetymeasures in the refinery, which directly results to negligence(Honnungar,2011).It is evident from the reading that the company had prior knowledgeof the safety hazards that were existent at the refinery but tooklong to act hence leading to the accident. The company, out ofnegligence, allowed the employees at the refinery to operate withantiquated and poorly maintained equipment subjected to undueproduction pressure.

Accordingto the Chemical safety Board chairperson, Carolyn, BP had anunfortunate culture of negligence. It is clear that the BP managementhad knowledge on the safety dangers that the refinery at Texas posedas early as 2002. However, instead of embarking on measuresalleviating the dangers at the refinery, the management continued toorder the directors at the refinery to try and cut cost by 25%. Thisled to the accident in the refinery in 2005. It goes without sayingthat the accident at the refinery could have been avoided if themanagement of the company had acted on the reports of the safetymeasures at the refinery. Their failure to act can only be describedin a simple term negligence at its best.

Inthe case of Prudhoe Bay pipeline burst and spill in 2006, the companyagain is culpable of negligence. Government and private investigatorsfound out that the pipeline was extremely corroded. It is clear fromthe reading that the company used sub-standard measures to detectcorrosion of the pipeline. The company went for coupon method insteadof the oil industry recommended smart pig technology. It can clearlybe argued that the company was doing this in an effort to reduce itsoperational costs. Research indicated that the pipeline had not beencleaned since 1992 (Freudenburg&amp Gramling, 2011).Despite the reduce flow rates in the pipes, the company never tookinterest in cleaning the pipes to avert any dangers of a burst andspill situation.

BPhas had numerous environmental issues in this reading. The oil spillsthat the company has been experiencing present a company that haslittle or no regard to the environment. In one instance in 1999, thecompany voluntarily agreed to have damped hazardous material in aPrudhoe Bay site (Honnungar, 2011). This is detrimental environmentalissue to company such as BP, which has a global representation andboasts of its commitment to protect the environment. The case haspresented BP as one of those companies, which have a huge negativeimpact on the environment. It is also clear that a majority of theoil spills that faced BP were as a result of negligence to maintainand clean or replace the pipelines (Freudenburg &amp Gramling,2011). Ignoring such measures knowing too well the environmentaldangers they pose, presents the company as having little or regardfor the environment.

Thefact that BP had rented the rig from Transocean, it had theresponsibility of ensuring that the rig is repaired accordingly. Anydamages to the rig must be the responsibility of the company torepair in order to ensure the safety of its operations. Therefore, BPcannot distant itself from responsibility. In its own admission, BPasserted that its managers at the rig did not repair the pumps due toa tight budget. It is therefore clear that the company had nogoodwill in ensuring that the rig was safe. The oil spill at the rigin June 2008 at its Atlantis rig is as a result of negligence by BP(Freudenburg &amp Gramling, 2011). The company cannot thereforeshift the blame to the contractor. BP had the responsibility ofensuring that the contractor has the capacity to deliver on theexpectations. Whereas the contractors rig might have failed, theblame will clearly go to the BP Company. The company has role ofprotecting its image worldwide by putting strict safety measures inits operations, regardless of the cost.

Themisfortunes that BP found itself in 2006 were self-inflicted. It isclear from the case that the company had embarked on an effort to cutoperational cost from the year 2001. However, the company failed tomaintain the safety measures that were therefore with the reductionof operational cost. The failure by the company to act on time onreports of potential explosions and spills, led the company to itsstate in 2006 (Honnungar, 2011). For instance, the Texas CityRefinery explosion could have been prevented. It is evident form thereading that the company had prior knowledge of the poor safetystatus at the refinery. However, the management of company ignoredthe reports highlighting the potential danger at the refinery(Honnungar, 2011). It is interesting to note that the company hadeven agreed with OSHA that it was to look into the safety lapse atthe refinery. However, the company violated all the agreements andwaited until the disaster struck in 2005 killing 15 people andinjured many others. The $80 million fine that was imposed on thecompany had tremendous effect on its financial capacity and position.This contributed to the state that the company found itself in 2006.

ThePrudhoeBay pipeline burst and spill in 2006 was another spill that thecompany would have prevented. A report in 2004 highlighted on theextreme corrosion happening on the pipeline. The company did not actupon the report until the disaster struck. Their use of coupons as ameasure to detect corrosion on the pipeline was also a huge factortowards the spill (Honnungar,2011).The company, in a bid to cut on cost, failed to go for therecommended smart pig technology for detecting corrosion on oilpipelines. If the company had acted upon the reported, the oil spillwould have been prevented.

Inaddition, the company would have prevented the oil spill if it hadnot gone for the substandard measures of detecting pipelinecorrosion. The company needed to embark on a regular cleaning andmaintenance services on the pipeline. Such measures would haveensured that the spill was prevented. Consequently, the company couldhave prevented exerting external pressure on the pipeline and thatwould have prevented the spill. It is evident that the prevention ofthe spill in Prudhoe Bay pipeline burst and spill in 2006 would haveprotected the reputation of the company around the world. TheDeepWater horizon oil spill was also as a result of cost cuttingmeasures by the company. They used a substandard design in drillingthe oil that led to the spill (King&amp Library of Congress, 2010).

Thedecisions by the company to cut on cost since 2001 to 2006 hadtremendous costs. The Texas refinery explosion and the numerous oilspills subjected the company to billions of dollars in fines. Thesefines left the company at a poor state of finances. The DeepWaterHorizon oil spill, which has been described as one of the largestenvironmental disasters in history, had a detrimental financialeffect on BP (King&amp Library of Congress, 2010).The company had to pay over $20 billion dollars as cost to people andentities that were affected by the spill. This led to the companygoing at a loss in 2007.

Theinsistence by BP on cost cutting had huge detrimental effects to thecompany. The company adopted substandard equipment and safetymeasures that led to various accidents in the refineries and in thepipelines. This led to huge environmental destruction and loss oflife and property. In addition, the company was subjected to hugefines and costs that led to it making huge losses in 2007. Thereputation of the company was also adversely affected by the costcutting measures.

Itwas the responsibility of BP to ensure the safety of its refineriesand pipelines. The negligence depicted by the company in regard tosafety measures is unacceptable. It is clear that BP was cutting onoperational cost at the expense of safety measures. The case haspresented numerous instances where the company adopted low standardequipment in order to reduce on cost (Honnungar, 2011). However, itis vital to note that such compromises are even costlier in the longrun. The company depicted total lack of social responsibility toprotect the environment, the people and property. It is evident thatthe main aim of the company was only to make profits without regardto the various safety and environmental measures.

Othercompanies have a lesson to learn from the misfortunes that havebefallen BP. Other companies need to realize that the responsibilityof protecting their employees and the environment lie squarely withthem. It is also evident from the BP experience that cost cuttingmeasures should not in any way compromise on the quality of equipmentor services that a company offers.

References

Freudenburg,W. R., &amp Gramling, R. (2011). Blowoutin the Gulf: The BP oil spill disaster and the future of energy inAmerica.Cambridge, Mass: MIT Press.

Gordon,P. J. (2007). Leanand green: Profit for your workplace and the environment.San Francisco: Berrett-Koehler Publishers.

Honnungar,V. (2011). BritishPetroleum Oil Spill Crisis and Aftermath: Corporate Governance andCommunication at BP during the disaster.Munich: GRIN Verlag GmbH.

King,R. O., &amp Library of Congress. (2010). DeepwaterHorizon oil spill disaster: Risk, recovery, and insuranceimplications.Darby, PA: Diane Publishing.