February 20, 2014
BP and International Energy
This paper will discuss the strategies of BP as it continues to maintain and grow its market share in energy production. This paper will address environmental concerns and international energy consumption as it pertains to BP’s global reach for market share.
BP also known as British Petroleum, has had to adapt its business plans, to fit in the ever changing global energy competition. BP must grow to meet global demands for energy while balancing economy, ecology and ethics. Different global customers will require different strategies to grow market share while making a profit for the shareholders.
The United States According to BP (2013), the overall global energy demand has grown at a slower rate in the past year. The cost of energy has grown year after year leading to customers working to increase efficiency. Annual growth has dropped globally from 2.4% to 1.8% for the oil and gas producers like BP.
On the supply side, the most noticeable phenomenon remains the American shale revolution. In 2012, the US recorded the largest oil and natural gas production increases in the world, and saw the largest gain in oil production in its history (OIL).
Increased production of oil domestically in the Unites States and lawsuits from environmental and safety issues continue to hurt BP in the global market. The Texas City refinery explosion in 2005, the Prudhoe Bay oil spill in 2006, and the Deepwater Horizon oil spill in 2010 lead to potential fines and legal liabilities of $17.6 billion total by the end of 2014 ("BP," n.d.). Environmental policies in America are often stricter than in other nations around the world.
China and India China and India as emerging economies are responsible for nearly 90% of the net increase in global energy consumption (BP, 2013). BP has shifted more of its efforts to meet demand in these new markets; however, coal is the preferred fuel not oil or natural gas. China consumed 50.2% of all the coal in the world in 2012 (OIL). Nations like China and India are much less strict on environmental issues due to the drive to grow their economies. North America has the largest individual coal reserves in the world, but China and Russia is a close second. BP as a corporation is selling off facilities and backing out of the American markets to some extent for these emerging markets. Easier environmental policies and a greater demand for energy, make the Chinese and Indian markets desirable for the bottom line.
According to BP (2013),” There were -89% declines in Japanese Nuclear energy due to Fukushima reactor incident.” The response to the nuclear disaster in Japan has allowed BP the opportunity for expansion in the Japanese market. Fossil fuel imports rose to compensate. Natural Gas being the key fuel source making up the difference from nuclear in the Japanese markets. Unlike the Chinese and Indian economies, the Japanese have a much stricter environmental policies similar to the United States.
Deontological Ethics BP’s global movement of assets may shed light on its overall ethical perspective in business. BP has a fiduciary responsibility to its shareholders to manage assets and invested capital to maximize returns. This deontological or duty based view of a company’s responsibility puts the good of the bottom line above all else, possibly even safety or environmental concerns. According to "Financial Times" (2013), “BP was the fifth largest company in the world in revenue and the sixth largest Oil and Gas Company measured by 2012 production”. After numerous safety fines at the BP Texas City refinery, Prudhoe Bay pipeline spill, and Deepwater Horizon spill in the gulf coast, BP sold the refinery and faced billions in fines due to EPA rules and regulations. According to “Financial Times” (2014), “BP was the…