Refer to the Energy. A High-Risk Industry case study in Chapter 13 of the textbook. Respond to the following in a total of 525 to 700 words: Determine whether British Petroleum (BP) Included the potentlal costs of an explosion and possible environmental disaster in its worldwide drilling program. - Recommend risk-based advice to BP for when they are considering the project vlability for deep water drilling. - Analyze 2 or 3 social ethical issues that BP should consider. Consider the capabilities to recover more oll with horizontal drilling and hydraulic fracking. - Determine whether it is ethical to use these methods to increase the valuation of drilling projects and the firm's stock price. - Identify the stakeholders in energy production. - Analyze whether there is an ethical trade-off between improved oll recovery and the cost to the environment. Who ultimately pays for the externalities created by energy producers? Analyze whether the falling prices of natural gas will have a negative or positive impact on solar and wind powered projects. - Consider what you have learned about capital budgeting. - Assess whether greater values of energy producing firms or lower carbon footprints benefitting society should be pursued. - Summarize an ethical issue that will impact energy producers and society. Energy: A High-Rlsk Industry One industry that affects worid economies is energy. This industry includes coal, natural gas, oll, wind, solar, and even the Canadian tar sands. The prices of all these types of energy are important to every person and company that uses electricity, buses, cars, airplanes, trains, plastics, fertilizer, and more. The search for energy sources can be high risk and can result in either large deposits that generate high returns or no returns if nothing is found. Additionally, as companies search for oil in deeper and deeper waters, the technology used is more sophisticated and the chance of a disaster becomes higher. Just ask BP about the more than $20 billion in fines and claims that it will cost the company to settle the Gulf of Mexico Deepwater Horizon rig explosion that occurred in April 2010. Did it include the potential cost of disasters in its worldwide drilling program? Besides the risk of a disaster, every producer of energy is affected by the cost of alternative energy sources. For example, the International Energy Agency now predicts that the United States will be energy independent by 2020. An article in The Journal of the International Energy Agency made this comment: Five years ago no one would have been talking about the prospect of U.S. energy independence. But this year, domestic crude oil production should rise by 10\%, and within five years the United States is likely to breok the record output high reached more than two decodes cigo, to firt with the position of top worid producer. 5 The amazing part of the story is that new technology, such as horizontal drilling and hydrautic fracturing, has found ways to get more oil and gas out of old deposits and to recover oll and gas from piaces that were previously unrecoverable. Estimates are that in the last. five years, the United States has found enough natural gas tor 50 years and is still finding more. Natural gas is priced per one thousand cubic feet of natural gas or by its equivalent, 1 million BTUs (British thermal units). The price of natural gas has gone from $12 per thousand cubic feet in 2008 , to $6 in 2011 , to $2 in 2012, and $2.79 in 2015. Now if anyone could have predicted this price movement, capital budgeting decisions would have been greatly influenced. Go back and read the quote. Five years ago, no one knew that the United States would find so much natural gas in the Marcellus Shale of Pennsylvania and West Virginia and other shale formations in Texas, Colorado, North Dakota, and other western states. Now this should all seem like good news, but environmentalists are worried that these low natural gas prices will set back wind and solar power projects as natural gas is now more cost competitive. This affects the capital budgeting projects for electric utilities and changes the balance between coal-, oll-, and gas-generating plants. It also affects the budding solar industry and companies like General Electric and Slemens that make electric generating wind turbines. The ability of the United States to become energy independent also has a geopolitical impact as it reduces U.S. dependence on Middle East oil, which at times can be unpredictable and used as a political tool. The newtound sources of oil and gas will reduce some of the uncertainty of supply constraints. At its peak, the United States imported $300 billion of oil per year, and so more domestic oil production will help the country reduce its trade imbalance. This will affect the economy and the value of the doliar and other unpredictable benefits and costs. We have presented an ever-changing picture of energy and its costs, which needs to be forecast by many companies around the world. The point is that even though we can try to put probabilities on potential outcomes. the accuracy of our forecasts is probably not too high. Given the economic interactions of energy on multiple industries, all the consequences are difficuit to predict