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Shell Oil Management Of Crisis Essay Research

Shell Oil: Management Of Crisis Essay, Research Paper Royal Dutch/Shell Oil Company: The Management of Crisis An overview of the oil industry After years with a low profile, thanks to stable prices and ample supply, the oil industry-along with the rest of the energy business-is back in the spotlight. The United State these days feels as if it has been transported back in time to the 1970s, when rising energy prices helped to push the economy into a recession and to generate a national dissatisfaction.

Shell Oil: Management Of Crisis Essay, Research Paper

Royal Dutch/Shell Oil Company: The Management of Crisis

An overview of the oil industry

After years with a low profile, thanks to stable prices and ample supply, the oil industry-along with the rest of the energy business-is back in the spotlight. The United State these days feels as if it has been transported back in time to the 1970s, when rising energy prices helped to push the economy into a recession and to generate a national dissatisfaction.

A year ago, oil prices surpassed $30 a barrel for the first time since 1991. Last summer (2000) gasoline prices shot up, exceeding $2 a gallon in parts of the Midwest. This past winter natural gas prices went through the roof. At the same time, utility deregulation has created an electricity supply problem in California, resulting in periodic blackouts in the nation’s largest state.

The experts professto be baffles by the soaring prices. Many blamed the natural gas problem on the cold weather; others say consumers went overboard in switching from oil to natural gas. Yet others charge that the federal government and environmentalists discouraged exploration in the 1990s. Rising oil prices were attributed to miscalculations on the part of OPEC planners and domestic refiners. Some fingers were pointed at the U.S. penchant for gas-guzzling SUVs.

Mainstream analysts avoid another, more compelling explanation: that the increasing concentration of ownership in the energy industry is reducing competition and thus contributing to price inflation. The petroleum industry has seen a remarkable wave of mergers in the past few years. Exxon took over Mobile. British petroleum swallowed Amoco and the Atlantic Richfield. Chevron recently acquired Texaco. Phillips Petroleum took over Tosco Corp., creating the second largest refining operation in the country, after that of Exxon Mobile. What were once known as the seven sisters-the world’s largest integrated oil and gas producers-were reduced to four in no time at all.

The survivors of this takeover wave has been enjoying extraordinary growth in their profits. Last year Exxon Mobile had a net income of $17 billion-an all-time record not just for that company, but for any company. Exxon Mobile’s profit was double the amount the company netted the year before. One hundred percent profit increases were also posted by BP Amoco, Chevron and Texaco.

Unlike the 1970s, when President Carter accused oil companies of staging “the biggest rip-off in history.” There has been no aspersions cast on the industry by the Bust Administration, which is led by two former oil men. Instead, the Administration is promoting business-friendly solutions to the problem. Bust advocates oil drilling in areas of the Arctic National Wildlife Refuge, and Cheney is preparing an overall energy strategy that is likely to be heavy on regulatory relief.

Congressional Republicans are eager to jump on this bandwagon. Senate Energy Committee Chairman Frank Murkowski of Alaska has introduced the National Energy Security Act (February 2001). Apart from encouraging Arctic National Wildlife Refuge drilling, the bill would, among other things, streamline environmental permitting and review procedures. While an amendment, specifically H.R. 4, has recently been introduced, which limits exploration activity in the ANWR, we are surely in over our heads.

The history of Royal Dutch/Shell Group

2000 profits: $12.7 billion

Royal Dutch/Shell is a peculiar British-Dutch partnership. The British side of the company had its origins in the efforts of Marcus Samuel to challenge Standard Oil in Asia. Samuel’s “Shell” Transport and Trading Company eventually hooked up with a firm called Royal Dutch, which started out drilling for lighting oil in Sumatra. In the early 20th Century what became known as the Royal Dutch/Shell Group began acquiring properties in the U.S. market that were later collected under the name Shell Oil Company. During the 1980s Royal Dutch/Shell became the target of an international campaign to pressure the company to end its extensive oil, chemical and coal business in South Africa. The company was accused of violating the United Nations embargo on the export of oil to the apartheid regime. During the 1990s, the company came under similar criticism because of its dealings with the dictatorship in Nigeria and the environmental impact of its operations in the United States, Royal Dutch/Shell recently announced an unsolicited takeover bid for Barrett Resources Corp.

Think of the oil multinational Shell, and you will probably imagine petroleum pumps, super tankers, refineries and North Sea oil rigs. You would be right to conjure these images up in your mind. What you probably will not see is supply chain management and the business infrastructure support that is necessary and critical to keep the North Sea oil operations of Shell U.K. Explorations and Production supplied with materials and services.

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