- Business Context
- Introduction
- Energy plays in an important role in our lives. The increase in the prices of energy, concerns about energy depletions of the various resources and changes in climate are some of the current trending issues in the energy sector. This paper discusses some of the trending issues in the energy sector. In relation to this the paper first provides an analysis of the stakeholder’s involvement in the view of the fracking development. The paper also provides an explanation of how the prices of energy are affected during the 2013 winter. In addition the paper also analyses the corporate social responsibility of the various business in the energy. Finally this paper provides my own analysis of the impact of the government involvement in the supply and prices of energy.
- Part 1
- Definition of terms
- Fracking- refers to the procedure of creating fracture in rocks through injecting fluid into the cracks to force them to open further (Graves, 2012, p.10). The water that is injected into the rock in most cases is mixed with sand and chemicals where the mixture is injected at high pressure creating a fracture that allows gas and petroleum to bearing solution to flow into the surface
- Stakeholders- refer to a party that has some interest in certain enterprise or project.
- Hydraulic fracturing is one of the key methods of extracting unconventional oil and gases. This is because according to the International energy agency the shale gas deposit are estimated to be over 208 trillion cubic meters (Craig, 2013, p.242). The extraction of the shale gas can helps to reduce the cost of the natural gas. The development of the natural gas is vital for energy independence and economic growth of a country. However extraction of the shale gas is associated with several environmental pollutions and therefore in most case faces a lot of oppositions from different stakeholders such as the politicians, non-governmental organization that deal with the environment issues (Davis, 2012, p.177).
- One of the leading controversies surrounding the extraction of the shale gas is with regard to its potential of contaminating the drinking water with traces of methane and drilling chemicals. The process of extracting the gas causes leakage of drilling fluids from the well borehole into the near surface aquifers. Fracking is also known to consume a lot of water and therefore may have adverse effects on the water sources (Water Industry Sets out Concerns over Fracking 2013, p.10). Emission of the gas and vapor to the atmosphere is another major environmental concern of fracking. However is important to note that some people argue that the gas produces less carbon dioxide than others gases therefore it is a good to news to the environmental specialist. This is because its use can help to lower the amount of carbon dioxide emitted into the air.
- Various pressures from the stakeholders have caused different countries to implement measure to regulate the extraction of shale gas. In UK for instance the government was forced to shut down the fracking sites near Blackpool in the spring of 2011 due to a small earthquake that was related to the fracking. In relation to this the government of France banned the fracking in May 2011 due to the pressure from the various environmental groups (Craig, 2013, p.247). There are various groups that have been formed to help in regulating the extracting of the gas these include the European Union Technical Working Group that initiate view regarding the shale gas extraction in Europe. The shutting down of the shale gas production in USA is projected to have the following effect on the countries net import.
- From the diagram it is evident that the shutting down of the extraction of the shale gas is likely to increase the countries net imports.
- Part 2
- Theory of demand and supply as it applies in energy provisions
- One of the most global important products today is the oil since it is the major source of energy that is used by various industries worldwide. The presence of oil in country is not only a source but also because it is a source of geopolitical power. The demand for energy especially from the oil is currently highly inelastic. This because irrespective the cost of oil most people argue that their use of oil must go on. This can be linked to the fact that it is not possible to switch from using the cars as means of transport. Ships and aeroplanes cannot move without diesel or kerosene for their propulsion. The result of the short term demand curve of the oil is therefore as shown in the diagram
- It is therefore evident that in the short run large changes in the prices of oil has small significance with regard to its demand (Oil Supply, Demand And Price Outlook. 2010, p. 16). The supply of the oil is also relatively inelastic considering that the actual cost of the pumping the oil is relatively low. It is therefore evident that the cost of producing energy does not increase even when the producing capacity of the oil is increased.
- During the winter season the demand of the natural gas as source of energy is increased in the short run. The main driver of the high demand of the natural gas during the winter season is the fact the people uses more energy to for the residential and commercial heating. The following is diagram illustrating the short-term effect of the prices changes during the winter season
- The heating requirement is highest during the winter season compared to other season such as spring. This relatively increase in the demand of gas during the winters season causes the prices of the gas to be relatively elastic compared to other petroleum oil product. From the above the diagrams it is evident that the increase in the quantity of gas leads to an increase in the prices. However it is important to note that the above diagram only represent the short terms economic condition for the demand of gas mainly due to winter. This is because OPEC, which is an intergovernmental organization of 12 major oil-producing countries in the world, regulates the prices of all the petroleum products (Jordan-Korte, 2011, p.2).
- Part 3
- Ways in which the various organizations in the energy sector ensure profitability, law abidance, social and ethical support
- Economic profitability
- Various organizations in the energy sector are able to realize a lot of profit due to the high demand of energy worldwide. Counties that produce oil are able to realize economic growth due to the sale of various petroleum products. In relation to this country that are able to exploit their energy productions efficiently are able to realize economic growth and therefore improve the lives of their citizens. Various organizations that have been able to use the alternative sources of energy such as the wind power are able to lower their cost of production. Lowering of the cost of production has helped these companies to realize competitive advantage.
- Law abidance
- Various organization operating in the energy sector have been forced to implement measure to help ensuring that they comply with the laid down rules and regulation governing the production of energy. In relation to this most of the organizations have implemented measure to ensure that they reduce the levels of carbon dioxide emitted into the atmosphere. Besides complying with the various laws and regulation in the energy sector the various organization that are operating the sector have also implemented measure to ensure that they comply with the labor requirement. This is to help prevent unnecessary industrial unrest associated with the failure of management to adhere with the labor laws. It is also evident that most of the organizations in the energy sector have committed effort in order to improve the working condition of their employee.
- Social roles
- The management of various organizations in the energy sector has also committed effort toward ensuring that they improve on the social corporate responsibility. Most of the organizations have committed effort to ensure that they educate their employee through providing bursaries to help them pursue their career goals and objectives. Additionally organizations in the energy sector have also committed effort in order to protect the environment where most of them have implemented measure to reduce the emission of carbon dioxide into the atmosphere.
- Ethics
- Ethics refers to the various acceptable codes of conducts (Treviño & Nelson, 2011, p.2). Ethics in business is important since it helps to ensure that the organization is able to earn respect from its customers and at the same time attract more skilled labor. Adherence to principles of ethics also helps to attract investors thereby ensuring that the business continues to earn profit (Homburg, Stierl & Bornemann 2013, p.55). Various firms in the energy sector have also implemented measures to ensure that they adhere to principles of ethics. For instance most of the companies in the energy sector carry out a transparent and open recruitment process.
- Part 4
- individual reflective on the impact of government involve on the supply and price of energy to business
- Government involvement can affect the supply and prices of energy by business in the energy sector in several ways. First government intervention in the energy sector can force the business in the energy sector to lower the prices of energy, which can in turn lower the profitability of these businesses (Steger, 2005, p.45). On the other hand lowering of the prices on the energy helps to ensure that the other businesses apart from the business operating in the energy sector are able to realize a decrease in the cost of production. The effort of the government to conserve energy can also affect the supply and prices of energy. This is because through the government effort to convince people to reduce their energy consumption can lower the demand of energy affecting the profitability of the companies operating in the energy sector.
- Moreover various government subsidies in the energy sector can help to lower the cost of production of the various organizations operating in the energy (Vedavalli, 2006, p.113). This can in turn help to ensure that the various business operating in the energy sector are able to increase their energy supplies in the market thereby leading to a decrease in the prices of energy. The government effort to encourage various businesses to invest in the energy sector especially in the renewable energy has also impacted the supply and prices energy where it has led to increase in the supply of energy and at same decreases in the prices of energy. Additionally, the policy of the government to privatize the various organizations operating in the energy sector can also have some impact on the supply and prices of energy. This is because with privatization various organizations can be able to increase their supply leading to low energy prices since privatization can lead to increase in efficiency in an organization.
- Conclusion
- From the above it is evident that the energy sector is one of the most important sectors with regard to with regard to the country’s economy. Prices of the energy in most cases are inelastic due to the fact people are willing to pay more in order to in order to acquire energy. Pressure from the stakeholders in the energy industry can also have an effect on the demand of extraction of share gas. Various businesses operating in the energy sector have been forced to implement measures to help ensure that they comply with the government regulation. With regard to the social role it is evident that the businesses operating in the energy sector have implemented measure to ensure that they are socially responsible. It is also important to note that the government involvement in the energy sector can affect the supply and prices of energy.
- Reference
- Craig, R. 2013. Hydraulic Fracturing (Fracking), Federalism, And The Water-Energy Nexus. Idaho Law Review, 49(2), 241-264.
- Water Industry Sets Out Concerns Over Fracking. 2013. Engineering & Technology (17509637), 8(8), 10.
- Davis, C. 2012. The Politics of 'Fracking': Regulating Natural Gas Drilling Practices in Colorado and Texas. Review Of Policy Research, 29(2), 177-191
- Oil Supply, Demand And Price Outlook. (2010). USA Oil & Gas Report, 16-20.
- Homburg, C., Stierl, M., & Bornemann, T. 2013. Corporate Social Responsibility in Business-to-Business Markets: How Organizational Customers Account for Supplier Corporate Social Responsibility Engagement. Journal Of Marketing, 77(6), 54-72.
- Jordan-Korte, K. 2011. Government promotion of renewable energy technologies: Policy approaches and market development in Germany, the United States, and Japan. Wiesbaden: Gabler Verlag.
- Vedavalli, R. 2006. Energy for development: Twenty-first century challenges of reform and liberalization in developing countries. New York, N.Y: Anthem Press.
- Steger, U. 2005. Sustainable development and innovation in the energy sector. Berlin: Springer.
- Graves, J. H. 2012. Fracking: America's alternative energy revolution.
- Treviño, L. K., & Nelson, K. A. (2011). Managing business ethics: Straight talk about how to do it right. New York: John Wiley.
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