Monday, November 23, 2015

PetroChina: The True Cost of Cheap Gas (2013-2015)

PetroChina logo
PetroChina, the leading gas and oil company in China began construction of a new oil refinery plant in Kunming, the capital and largest city in China's Yunnan Province in late 2013. From the beginning of the plans, concerns were raised by Kunming residents about the impact the refinery will have on their already tarnished land. Being the site of many previous similar refineries and plants, the local water and air quality has been significantly affected. The towns main water supply, neighboring Tangling River, has been polluted to unsafe levels from previous and surrounding plants dumping waste materials and chemicals. In addition to water pollution, refineries such as PetroChina's new one make the air of the region so polluted that it is nearly harmful to live in the area. Air Quality Index reports the Kunming area to have a reading of around 140, meaning that the air is unsafe to breathe for some people that have sensitive conditions. For scale, the AQI of Boston's relatively clean air reads around 35, four times lower than Kunming's. It is clear that the area has been negatively impacted by the operations of these types of plants and adding another would only make matters worse. Soon after construction began, the people of Kunming took to the streets in protest of the refinery and the harmful carcinogen paraxylene that was allegedly going to be used and produced in the plant. The government and PetroChina sent letters to the locals claiming that the chemical would not be used and to not worry about the refinery because they would operate within the guidelines of the law. More recently, in September of 2015, PetroChina halted an operational part of their plant in accordance with the Ministry of Environmental Protection for a violating environmental assessment rules. Even after approving of the changed assessment, the ministry discovered that the refinery had changed their design without making a new assessment, attempting to go around the system. As the construction finishes up, locals continue to protest the plant and the company, but will that change anything?

Kunming, China, where PetroChina's
oil refinery plant is located
Identifying the people and parties that are affected by this business action and reactions is very important when evaluating a case such as this. The main stakeholders in this situation are the PetroChina executives that make the major decisions, President Wang Dongjin, Board of Directors and Vice Presidents. Although these people profit the most, every single person that holds stock in PetroChina (traded in New York, Shanghai and Hong Kong) should be considered a stakeholder because they will gain or lose money based on the company's decisions and production. The remaining stakeholders of this case are the people of Kunming and neighboring cities that will see pollution in water and air rise because of the plant. Now that the stakeholders are identified, the case can be evaluated through the lenses of the major business ethical theories.

According to Milton Friedman's theory of Individualism, the only goal that a business should pursue is maximizing the profit of the business for the sake of the stockholders and owners. Any others actions that the business takes is considered stealing from the people that put money and time into the company. To an individualist, this case would not be alarming; PetroChina's revenue would increase if they constructed a new refinery so they should do so. PetroChina would not make any direct money from cleaning up the river or air, so they are not going to. Some have modified Friedman's Theory such as philosopher Tibor Machan who states that the goal of business should be to profit but this goal might be met though indirect goals not aimed at profiting. Because of this variation, Machan's Individualism is more likely to view this case as unethical, but the original principles from Friedman's theory still hold true and make it ethical.

PetroChina gas station
John Stuart Mill's theory of Utilitarianism claims that happiness and pleasure are the only intrinsic things of value to people and it should be sought after by everyone. This is rationalized by the idea that happiness holds value in every person so one's is not any different than an other's. While a Utilitarian would have to think about this case longer than an Individualist, they would ultimately agree that PetroChina is acting ethically. Even though the people of Kunming are forced to live without clean air or water, the billions of people that count on PetroChina to keep their car running, house warm and countless other things safe outweigh the people that are hurt by the operations.

The theory of Kantianism focuses on the importance of acting rationally and with respect towards others and yourself while not using other people as a means to an end that only benefits the company.
Being motivated by the moral right rather than other things makes someone ethical in the eyes of a Kantian. The actions of PetroChina are very much against what Kantianism believes because they are disregarding other people's well-being in order to pursue a profit for the business. Not respecting the people of Kunming and continuing to act immorally by using them and their land goes against what a Kantian would advise. Although PetroChina does serve billions of people, they are only doing it because they are being paid, not because it is the ethical thing to do.

Protestors fighting PetroChina
Virtue Theory 
Virtue Theory, developed by Aristotle, claims that the world functions properly when people live with certain aspects that promote healthy and happy living for everyone and everything. The virtues of courage, honesty, self-control, and fairness are the four virtues that Aristotle stresses. This ethical theory can easily be applied to PetroChina's case using each of the virtues. For example, while PetroChina is acting courageously by giving up environmental assessments, they show hesitance by not changing their initial reports after they changed their process. This hesitance shows that the company is acting without the virtues that are needed. The second virtue, honesty, is also not shown by PetroChina. With no direct confirmation, many still have reason to believe that PetroChina plans on using the paraxlyene chemical in their operations. Although there is no direct evidence that they are or will be using it, the company has not been entirely honest throughout the planning, construction and beginning operations. The third virtue that Aristotle focuses on is temperance or self-control, describing people's expectations, desires and management of their actions. Even though PetroChina lies to customers and others, they do have realistic expectations of what they need to do to meet the demands of all of their customers and do so very efficiently. The fourth and final virtue that needs to be looked at is justice and fairness in a business or person, describing hard work, quality products, good ideas and fair practices. At the end of the day, PetroChina serves billions of people around the world a cheap reliable source of fuel for all of their needs. While PetroChina does fit the virtues of temperance and justice, they do not exhibit the important virtues of honesty and courage and therefore are unethical in the eyes of the Virtue Theory.

Ethical Evaluation 
Zhou Jiping, CEO of PetroChina
After studying this case for the past couple of months while learning about the different philosophical theories that can be applied to businesses, I believe that I have generated enough knowledge and information on the case to effectively evaluate the recent actions of PetroChina. The actions of pollution make their business unethical right off the bat. While many companies pollute, knowingly polluting the water and air of the Kunming region with toxic chemicals and carcinogens even further, while the people protested and asked for answers, puts PetroChina in a very unethical position. From not getting evaluated to failing certain Ministry protocols, it is clear that PetroChina does not care about how they are viewed, they are only in search for more profits at the expense of anyone else. With this being said, there is some good in what PetroChina is doing with new refineries and pipelines; they are providing cheap, accessible gas to a nation the size of China. While their refinery is not the cleanest or most ideal, their customers get the gas that they need when they want it and do not care about the environmental impact of the process either. Even though it is extremely unethical, I do not blame them for building this new refinery, the government is not going to stop them, and the customers will continue to pay for the gas.


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