The 20th of April 2010 will be marked as the worst day in British Petroleum PLC’s history, the day that there was an explosion on the Deepwater Horizon drilling rig whilst drilling in the Gulf of Mexico, killing 11 people and causing devastation to all the surrounding areas. The events of this day affected the global markets and relationships between countries substantially. ?Daniels et al. (2009) states that globalisation is “The broadening set of interdependence relationships among people from different parts of a world that happens to be divided into nations. and “the integration of world economies through the reduction of barriers to the movement of trade, capital, technology, and people”. And undoubtedly the disaster has affected the relationships between countries and affected the world economies, be it the relationship with the board of directors of BP and the US government or the change in value of BP PLC on the stock exchange. ?As a result of the oil spill the Obama administration imposed a six month moratorium on new deep water drilling operations which ended on the 12th of October.
For twenty years previous to the oil spill in the Gulf of Mexico there had been a total ban on deep water off shore drilling. But during his presidency, Barack Obama lifted the barriers to allow deepwater drilling to take place and his reasons for doing this were said to be to reduce the reliance on importing oil in from abroad. The oil spill, however, has made the off shore drilling regulations more strict now meaning that the US will still have to import almost all of its oil from overseas.
The effects on globalisation being both positive, as the US still trades a lot for oil overseas, and negative as the barriers for trade have increased as the moratorium and new deep water drilling prevented drilling for 6 months. Also, the spill has led to an increase in regulations for deep water drilling on the US coastline and now uncertainty amongst oil companies as they are uncertain to what they can and can’t do. ?When the markets closed on the 20th of April 2010, BP’s share price was at the highest closing value it has been all year reaching 644. 07.
The events of the rest of that day have led to a decline in the value of a share in BP and essentially the value of BP in general. ?At the end of 2009 BP shares were 40% owned by shareholders from the UK and 39% owned by US shareholders. This shows that the rapid decline in share value (lowest closing price being 302. 90) has affected investors from all over the world and the lots of money will have been lost by investors all over the world. ?Also the amount of BP shares traded in the following weeks and months has increased dramatically and on the 10th of June 2010 over 300,000,000 shares in BP were traded globally.
Showing an increase in trading across economies. ?Not just the globalisation of the oil industry has been affected however. The tourism industry based around the Gulf of Mexico has been affected. For example, a three-hotel chain Based in Panama received approximately one thousand cancellations as a result of the oil disaster. This translates into $191,000 or more lost in room revenue alone. Not only has it affected this particular hotel chain, but hotels on the coasts of the Gulf States have been affected negatively due to customers believing that the beaches – part of the attraction and the sea will be oil filled/covered.
The cancellation of hotel booking will have led to cancellation of flights and other transportation methods as travellers look to go elsewhere or nowhere at all as a result of the oil disaster. This is an example of how the oil disaster has affected trade in the services industry amongst countries and states. The oil spill has been subject to global media coverage. On the 21st of April 2010 news broadcasting companies were broadcasting the news of this oil disaster all over the world.
Every day in almost any general newspaper there would be an article based on both the chief executive officer (CEO) of BP and how he planned to solve the disaster or just reporting the disaster again. This is a great example of Globalisation. Due to the improvement of technologies such as the internet/ broadband and other improvements in telecommunications the globe could now receive instant news /coverage about almost anything almost anywhere in the world. Meaning that people are now more aware of what is going on in the world. The drill that was used to drill the well in the first place is an example of trading across continents.? The drilling contractor that BP used to sort after a new oil rig, Transocean are a Swiss based company and instead of sourcing its production in either the UK, Switzerland or the US – where most of its shareholders reside, or in the UK where the company – British Petroleum – is named after; Transocean chose Hyundai Heavy Industries Shipyard, based in Ulsan; South Korea, as the company to build the oil rig which is valued at $560,000,000 – a contract which will have supported the steel industry in South Korea greatly.
This shows the whole world were cooperating and working with each other to extract the oil from the Gulf of Mexico and how the oil markets have moved towards being one global market. In conclusion, the BP Gulf of Mexico Oil Spillage has affected globalisation in mostly a negative way – due to it damaging the tourism, fishing and other industries of the Gulf States and also how government intervention – in terms of laws and regulations- can affect globalisation.
However, the disaster also demonstrates how everything is going towards a single global market and how much globalisation has already taken place. For instance, the ownership of British Petroleum by people from the UK was only 40% in 2009 despite the companies’ name. Also how the company sourced the rig from South Korea and how the oil rig was being used off the coast of the US, or even how much technology has improved to allow instant communication amongst many media across the globe which has allowed the events to be reported on a global scale.