Topics dealing with energy prices and costs have been discussed widely and at length by news media. Energy affects existence of human beings because energy costs have great influence in the determination of food prices. In situation where transportation is high, the prices of food and other products goes high. Food becomes expensive to an extent the poor are unable to afford it hence suffering from hunger. Oil production has been conducted through drilling that has seen many companies establish their drilling stations in different oil deposit locations in the world. This has changed with time due to the increased harvesting and overexploitation of oil deposits that are getting extinct. It calls for alternative sources of energy that is now developing to be oil sands. Some of the countries that have large deposit of oil sands include Russia, Kazakhstan, and Canada.
The increased extraction and utilization of these sources has been questioned due to the cost involved. First, huge amount of energy is used in the processing procedures. Secondly, gases emitted leads to the depletion of ozone layer and health complications. Third, water is used at length and in huge amount in cleaning up the components (Hough, Haines, and Giacomo 430). Environmental groups in the world have come out strongly to oppose the move by government to allow extraction of oil sands by regulating carbon emission through forced cost structures onto oil companies.
Canada is one of the countries in the world that has largely excavated its oil sands for commercial use. Moreover, it has the largest oil deposit as compared to other countries in the globe. Petroleum demand in the market has attracted many players into the industry hence prompting the utilization of available resources to maximize profit. This has also been attributed to the attractive oil prices in the world market that in most cases keeps on rising. Those countries that produce and export massive petroleum products to other countries globally are seen to have a very stable economy as compared to nations that import energy for its domestic and commercial use.
Social welfare has now been put in the balance between the needs to generate income from oils sands and measures to curb pollution of environment. Having a healthy work force is paramount to a country in generating and carrying out economic activities. This is because of the fact that the government spends or allocate less money to the health sector, to cater for the health needs of its population. Therefore, there is need to have a leveled playing field for extractors and the community to ensure that both benefit from the initiative. Contrary, if engaging in the endeavor has more negative effects than benefit; then government needs to rethink about the ordeal. This will ensure that the necessary rules and regulation are put in place to control the activities in the extraction and processing of oil sands.
In this section, the essay concentrates on the method used in the production of petroleum, negative and positive effects of the development, regulations in place to oversee and control this sector of a country’s economy, viability of the projects and social costs.
The first step in the production process is to identify the exact area with high concentration of underground oil deposit. Many scientific researches have to be carried out before coming up with a decision to actively engage and excavate the precious commodity. The unconventional oil is formed deep under the ground. This means that a company has to dig deep to extract it thus replacing the top soil that is fertile for the production of food. Therefore, the entire area where these activities take place becomes unfertile for growing crops (Sands 56). Some of the method used in extraction includes the oil sands tailings ponds, cold heavy oil production with sand(CHOPS) , cyclic steam stimulation(CSS), steam assisted gravity drainage(SACD),vapor extraction(VAPEX), toe to heel air injection(THAI) and combustion overhead gravity drainage(COGD). For the purposes of this assignment, we are going to discuss two of the methods that are SACD and THAI (Powell and Riding 50). Below is a picture of oil sands.
From the above figure, one is able to locate the presence of sand, water and clay components on the face of oil sand. This is how the oil looks like. The figure above is referred to as bitumen. It is widely spread in some places while in other it is in large quantity. To separate these components, heat and water is needed. Heat melts the bitumen to make it a liquid. Water splash away the sand and clay hence leaving out the oil to drop down the horizontal well for collection. Pumping of liquid oil runs concurrently with the collection activities (Nikiforuk 78).
Development of oil sands brings in mixed reactions from stakeholders. In case the government forces the social costs on companies, structural cost, low development will be seen hence increasing the prices of fuel. Consequently, the action reduces the countries revenues. First, a huge number of the population secures employment as they offer labor in various capacities. They are able to purchase goods and services at the prevailing prices hence businesses thrive at this environment. Secondly, revenue increases due to lower prices of energy internally while import of oil earns income externally (Tol 2070).
These developments have some drawbacks that culminate from the way the business is conducted. They include the pollution of the surrounding through dust and toxic gases that are not only harmful to human beings but also affects ozone layer. Habitation around the well is prohibited hence displacement of people occurs. Wild animals and plants are not left behind too because massive deforestation takes place to pave way for the development. Moreover, the gaping holes left behind after excavation holds water that is contaminated hence harmful for consumption and other household uses (Chung, Bae, Lee, Lee, and Jung 220).
Social cost brought about by these activities includes health costs, environmental costs and pollution costs. The company that caused the mess will cater for all these costs. Health costs include the hospital charges for individual who seek professional services in government hospital due to noise or air pollution. According to a study carried out by glen van Der Kraak, Acquatic animals living in contaminated waters suffered from endocrine disruption. At the same time two out of 900 succumbed to cholangiocarcinoma. In the year 2005, total social cost of carbon emission was estimated to be $43/tC which increased to $300/tC per ton in year 2013. However, due to the measures put into place to control emission the amount is deemed to reduce to $220 per ton. This is attributed to the United States government raising the tax from$10million to $15 million. This is a move to discourage massive pollution and negligence in regards to the environment. Environment costs incorporate air, soils, and water pollution In addition, there are losses accrued to these exploration activities (Kavanagh, Burnison, Frank, Solomon, and Kraak 127). One of them includes low agricultural produce that supports the economy while still employing quite a good number of people. The project rather encourages the development and upsurge of informal settlement where people come looking for job opportunities. These settlement acts as hideout for criminals who take advantage of the prevailing insecurity status to extort money from the public. Income generated from this section end up in the wrong hands due to insecurity. This means that the state has little to benefit from the ordeal. Government has to undergo the huge burden of securing and fighting crime. The higher the structural cost, the higher the operating cost would be hence oil companies will strive to lower these costs downwards. The society living around as well as the government will be on the safe side because these costs are kept at the minimum level possible (Crawley 20).
The laws adopted by government fall short of controlling the rising needs to engage in environmental friendly initiatives/activities. There is dire need to impose stringent rules that will leave no room for unhealthy business undertakings. Government has to institutes laws that impose the burden of social responsibilities on oil companies. By incurring the costs associated with their active role in excavating the commodity, companies will ensure that they self-regulate themselves internally by developing laws to guide employees in carrying out their day-to-day duties. Formulating good laws through the help of experts in the energy sector increases oil firm’s capability to install or introduce environmental friendly measures (Kavanagh, Burnison, Frank, Solomon, and Kraak 122).
The viability issues of oil sands development are determined by weighing the social cost over the benefits accrued. The real benefits of these projects in the country are not only a function of social costs but also environmental pollution costs. The world has expressed the need to invest in environmentally friendly initiatives that are not only conservative but also efficient. This sector needs innovation and interventions that will change the system used in drilling oil. Moreover, the operation cost also need to be lowered through innovations that are geared at lowering the system cost. Thus, each nation has a responsibility to secure the environment from pollution an action that enables reduce greenhouse gases in the air. Developments are positive and should be supported by any government because they earn revenues and provide job opportunities for citizens but if the cost of production is very high nation should discourage the move (Speight 34).
In recommendation, I think that the projects are worth investing in while government takes the step to include the costs associated to these projects in company’s structure. The two alternatives available in this case include the move to regulate activities and stop the projects. Stopping the activities has more disadvantages than advantages to the states. Therefore, the only option left is to regulate and control these initiatives in a manner that facilitates social responsibility. Carbon emission therefore should be lowered by the provision of proper rules that discourages the emission. On the other hand, government may demand the use of preventive measures such as the installation of control systems that prevents gases from being released into the air (Wang, Wei, Yang, and Zhao 125).
In conclusion, there are many options available for many states in the globe concerning carbon emission. Some environmental organization has suggested the closure of big companies in different sectors. This opinion is not practical in the real world because human beings must utilize the sources of energy in order to facilitate other activities in diverse sections. This means that the production and processing of oil affects industries that use oil in manufacture of other goods and services that consumers needs on daily basis. Therefore, the best thing to do is to regulate the manner in which different players conduct business and other associated activities. The energy sector reinforces other activities such as production and manufacturing activities. This shows how important energy is to a country.
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