Bp Deepwater Horizon Case Analysis

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Rafique Sheikh. MGMT 518: Legal & Ethical Env. of Business

BP’s ethical conduct concerning the Deep Horizon blowout

Background:

The Deepwater Horizon oil spill or the BP oil spill refers to the oil spill in the Gulf of Mexico which flowed for three months in 2010. The spill was a result of the explosion of Deepwater Horizon, which drilled on the BP-operated Macondo Prospect. The explosion killed 11 men working on the platform and injured 17 others (Summarized from Wikipedia article on: “Deepwater Horizon oil spill” http://en.wikipedia.org/wiki/Deepwater_Horizon_oil_spill )

In the following text we will analyze the Deep Water Horizon Oil Spill from some of the well-known ethical perspectives.

From the Perspective of the Communitarian Theory:

Communitarian theory supports and deepens the argument for a duty to rescue. On this view, community is valuable not merely as a means to the protection of individual right, but also as a positive human good (Halbert, Law & Ethics in the Business Env. pg. 7). In case of the Deep Water Horizon Oil Spill and BP’s conduct we find that the corporation did not consider itself part of a large community but rather as a business carrying out its core mission of extracting oil to sell. When the Spill did occur, however, communitarian theory compels the community at large to come to the rescue of the environment as well as the people affected by it.

From a Free Market Perspective:

According to well known free market economist, Milton Friedman, a corporate executive has a direct responsibility to the owners of his business or his employers to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of society (Halbert, Law & Ethics in the Business Env. pg. 11). When applying the free market ethical theory to BP’s decision the important question to ask is whether deepwater drilling for oil in the Gulf of Mexico is likely to be profitable for BP?

Let’s look at the demand and supply equation to better answer this question. We find that current and future trends forecast a steady increase in consumption of oil. The growing world economies such as India, China and Brazil are adding to a great deal to the demand as their citizens’ standard of living improves and they want to drive motorized vehicles rather than bicycles or carts.

On the supply side, about 10% of the world’s more than 1.3 trillion gallons of oil reserves—over 800 billion barrels—lies miles under the ocean floor. And while deepwater oil comprises a fraction of total global production, its potential is vast. Financial analysts forecast a vigorous future for it in the next 10 to 15 years.

From a strategic point of view we see that continuing its deepwater oil exploration and production work in the Gulf will sustain profits and give BP a competitive advantage.

The 2nd part of the Friedman’s analysis is to ask whether BP’s actions were legal. At the time when BP made its decision not to install the acoustic back-up switch there was no legal requirement to do so. Friedman would argue that companies have every right to voice their opinions by, for example, lobbying vigorously—as BP did—against more costly safety mandates. At the time BP made the decision a catastrophic oil spill seemed like a remote possibility. Even then from a business point of view BP may have chosen to go ahead as planned as it had the deep pockets to recover from a financial loss as a result of such a catastrophe.

From a Utilitarian Perspective:

According to the principle of utilitarianism, the right way to behave in a given situation is to choose the alternative that is likely to produce the greatest overall good (Halbert, Law & Ethics in the Business Environment. pg. 14). Cost-benefit analysis, what BP might have used to assess the profitability of deepwater oil production, is based on notions of utility. As an ethical...
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