Gulf of Mexico Oil Spill

1 Gulf of Mexico Oil Spill Oil industry is an important sector in individual and global economies. The industry is responsible for the accessibility and pricing of oil, an important component used in daily operations. The pricing of oil has a direct impact on the pricing of manufactured commodities i.e. those produced by the use of this important component. The contribution of the industry to global economy cannot be neglected. According to statistical figures, a good amount of energy consumed in the entire planet emanates from oil production. However, this unmatched production is facing acute rebellion from environmental groups. These groups argue that the industry is responsible for the pollution of the environment i.e. through carbon and other particle emissions. The aforementioned issue has seen Europe cut off the use of petroleum products. This is because the environmental activists have more weight and space to air their grievances.

However, issues are different in the Middle East, a region believed to be the leading producer of oil. Middle East is ranked at the first position in the consumption of petroleum products i.e. oil.

This has been made possible by the presence of government controls and media gags that have seen the suppression of human right activists. Despite the above challenges, a number of hitches have hit the sector hard. The essay seeks to analyze Gulf of Mexico oil spill and its effects on the oil industry.

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2 The oil industry is recovering from the global financial crisis. However, the recent hitch is mild compared to the 1970s oil crisis. The 1970 crisis was partly because of poor engagement of sound business and management tools. Application of sound management tools to the operations of a sector is vital in keeping it on its right economic footing. This is because a company is able to do a feasibility study in time and ensure that it is well versed with an environment before rolling out its operations. In addition, it ensures that an industry is regulated well to foster stability in the oil market. With the acute rebellion facing the industry, it is important to note that reasonable pricing per barrel is important to maintain clients if not attracting new ones. In business, it is evident that constant fluctuation of oil prices i.e. upwards and downwards will harm not only the consumers but also the oil producers in the long run. The aforementioned was experienced in the 1990s during the gulf crisis. During this period, millions of barrels of petroleum from the Middle East were suddenly interfered. The results were acute as it affected the supply of the basic commodity. The move to halt production from Iraq and Kuwait saw world oil prices rocket overnight. Although the halt affected many states, OPEC countries increased the pricing of oil to match the market demand and cater for the sudden shortfall of the commodity in the market. However, despite the rising of prices, the member countries were able to increase their supplies to satisfy the traditional market. The move resulted to stability of prices in the long run (Farrell 2011).

The spillover of oil in the Gulf of Mexico is an important phenomenon in understanding how oil industry reacts to disasters, courtesy of its management. The Gulf of Mexico crisis cannot be equated to any other halt in the oil industry. The crisis cuts across all aspects in the society. Government is a sole custodian of public interest and all operations undertaken by responsible government bodies ought to be friendly to the citizens. When disaster strikes, the

3 government is often at the receiving end from the populace who expect otherwise from the government. Disasters are prone to happen even with strict government’s eye. However, the swiftness of the government and responsible bodies to address the disaster is of utmost importance. Sound industry management seeks to diffuse a hitch to counter loses and maintain its image. The impacts of the Mexico spill over cannot be overstated. The negative effects to the surrounding population and natural resources are imminent. The spillover of petroleum effect has long-term effects that may be severe. However, with the use of state of the art technology and good funding, the damage can be minimized. This is evident in the successful handling of the Mexico disaster. The United States government response was swift in dealing with the crisis. To realize a sound outcome, sound management decisions are paramount. The problem solving steps have to be factored in and ensure a stage is exhausted before undertaking another task. Mexico spillage attracted the use of four important steps, “Disaster recovery and contingency services, Natural resources damage assessment, Ecosystem restoration and environmental engineering” (McCoy & Salerno 2010, p. 113). The steps dissect the oil spillage problem as it addresses all the affected areas.

The impact of the Gulf of Mexico spillover shocked the oil industry. The oil producers, the consumers and the government felt the loss. Interruption of oil supply to world economies sabotages the pillars of growth and development (Rawle, 2010). This is because the production of basic commodities is curtailed, courtesy of the lack of or increased costs of production.

Indeed, the Gulf of Mexico brought most economies to their knees. This is because with the spill came shortages and lambasting of the oil industry by some quarters i.e. the environmentalists and other human rights, and animal groups. The groups were castigating the government and the entire industry for laxity and insensitiveness to the plight of the society. The oil spill brought

4 with it commodity shortage. This led to relative increase in global oil prices as supply failed to match demand. However, OPEC member countries were swift in their response to increase supply of oil. Despite the fluctuating prices, the move by the member countries to increase their supplies to the global market stabilized the commodity price. Consumers faced the wrath of the crisis in full force. The failure to access the commodity for days called for a review of their consumption preferences. The demand for an alternative source of energy was evident. Most consumers observed that with the uncertainty crippling the industry, it could be prudent to diversify ways of obtaining energy. This move could cushion them from the ever-fluctuating prices of petroleum products. The demand for other sources of energy is a threat that faced the oil industry after the Gulf of Mexico Spill. The threat of a new entrant in the sector cannot be brushed off as most European countries are bending to the consumer’s plea and are exploiting ways of adopting new sources of energy i.e. the nuclear energy (Farrell 2011).

The Gulf of Mexico oil spill goes down the industry books as a crisis that put the oil sector in the spotlight as far as management issues are concerned. Government’s disaster response was also challenged to a large extent. The losses caused by the disaster called for the formulation of stringent laws to govern the industry. OPEC was criticized for failing to marshal resources to address the disaster. The legislations and proposed laws advanced by the US government and other countries meant that it was not going to be business as usual to company management. Management of an oil industry needs to be well versed with the imminent disasters in the industry (Donaldson 2001). This will help it set aside funds to be used in times of crisis.

In conclusion, sound management plays a pivotal role in the operations of an industry, especially the oil sector. From the above discussion, it is apparent that a slight disaster can cripple the industry. However, with well established institutions and disaster response units, the

5 crisis can be contained with much ease. Crisis causes more harm to an industry as it not only cripples it but also exposes it to external threats (Drucker 1999). Therefore, it is paramount that for an industry to contain shocks and flourish, it ought to avert crises where possible. In addition, companies need to train their employees on disaster management skills to enable them address crises swiftly. The aforementioned will help cushion the industry from harsh government legislations and laws. Moreover, it will help a firm stay on its profitability course. This will prevent the dissatisfaction of stakeholders who may be angered by the Gulf of Mexico oil spill and such like disasters. Finally, consumers need to dictate the policies adopted by a firm as they are always the bosses.

6 List of References Donaldson, L2001, The contingency theory of organizations, Sage Publications, California.

Drucker, P 1999, Management: Tasks, responsibilities, practices, Butterworth-Heinemann, Oxford.

Farrell, C 2011, Gulf of Mexico oil spill, ABDO, Arizona . health: A summary of the June 2010 Workshop, National Academies Press, Washington.

McCoy, A & Salerno, J 2010, Assessing the effects of the Gulf of Mexico Oil Spill on human Rawle, K 2010, Deepwater horizon oil spill disaster: Risk, recovery, and insurance implications, DIANE Publishing, Pennsylvania.