Essay Example on Sustainable Energy: The Need of the Hour for the World

Introduction

The energy sector plays a vital role in sustaining all the world operations for various day to day activities. From the technological, healthcare, information, transport, among other critical industries, energy is an essential requirement. While the world continues to advance and the energy requirements increase by the day, there have been speculations about the necessity to develop new and more sustainable forms of energy. Fossil fuel energy is the primary energy source on which most world systems are built upon and with still more oil reserves to be exploited, and oil companies still have a long way to meet the world's energy requirements.

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The concept of environmental pollution resulting from the use of fossil fuels has also emerged. With these challenges at hand, most have considered renewable energy to be the best alternative energy source that the world could shift to from fossil fuels. With lesser adverse environmental impacts as well as cheaper production means, renewable energy has been considered a potential replacement for fossil fuel soon. However, to implement such a shift from fossil energy to renewable energy will require changes in most production systems that are yet to be implemented.

Marathon Petroleum Corporation

Established on the 9th of November 2009, Marathon Petroleum Corporation is an American petroleum refining, transportation, and marketing company (Hey, 2019). The enterprise headquarters are located in Findlay, Ohio. Initially, the corporation was a wholly-owned subsidiary of Marathon Oil until a corporate spin-out in 2011 (Hey, 2019). Following its acquisition of Andeavor on October 1, 2018, Marathon Petroleum became the most significant petroleum refinery operator in the United States (Hey, 2019). The company had 16 refineries and a refining capacity of over 3 million barrels per day. The company is a multi-domestic structure with various affiliated subsidiaries across the United States (Hey, 2019). The history of the oil company can be traced back to 1887 when other small oil companies that were operation based in Ohio came together to form "The Ohio Oil Company."

Problem Statement

Marathon Petroleum Corporation is among the list of companies that have been adversely affected by the Coronavirus epidemic that has negatively hit the economy not only in the U.S but also in the global economy. According to a publication made in the NY Times on the 21st of April 2020, Workers at Marathon Petroleum’s refinery in Gallup, N.M., are turning off the valves (Krauss). This comes as a result of the fall in oil prices followed by a fall in demand, thereby resulting in a massive drop in the profitability of the oil production process. The company’s manager Scott Hanks said, "We are living a nightmare." The refinery at Gallup had a production capacity of approximately 26,000 barrels per day ("Gallup Refinery | Marathon Petroleum Refineries"). However, this production has been rendered unsustainable as the oil prices are falling globally and the demand. The company’s management says that the storage facilities are filling up, and there is no market for the product.

The company has been forced to pay early contract termination fees to contract employees as the production is not sustainable. With lockdowns and cessation of movement s in various parts of the country and globally, the demand for fossil fuel products has fallen even further. This has therefore led to the indefinite closure of this petroleum refinery part, and it is projected that more plants will follow suit soon if the economic slump witnessed continues.

Implications

The implications of this shutdown are expected to have wide-reaching and devastating effects not only for the company as a corporate entity but also for the employees as well. The company is expected to recount losses for the period during which they will not be in production, given that costs will be incurred in various sectors such as routine management practices for the refinery. This is a cost that the company will have to meet from the pocket as no production will be ongoing (Lioudis). The employees will be faced with even tougher challenges, having lost their source of income. Thus they will be forced to look into alternative employment avenues, which is particularly tricky during these pandemic times.

The implications of the overall fossil fuel industry are expected to be felt on a global scale. Oil companies have invested in other sectors, such as the stock market, transport industry, procurement, and bonds, among other diversification avenues that are aimed at increasing the profitability portfolio of these companies. With the shutting down of refineries due to the reduced demand for petroleum products, this is expected to transcend into other subsidiary businesses owned in this sector (Krauss). The effects of these will be an economic slump that will take a significantly long time to recover from.

Analysis

Various theories may be used to explain the current situation in the Marathon Petroleum Corporation and other fossil fuel companies. According to the law of diminishing returns, there reaches a point where the addition of marginal units of input does not increase the output. Currently, Marathon Petroleum Corporation is at such a point that even though an increase in the marginal units of inputs may increase the output, the prevailing market conditions of demand and supply make the production process non-profitable. This is because the application has fallen below the optimal point beyond which an increase in amount will not increase profitability. At such a position, the need to resuscitate the economy is necessary to ensure that the balance between the supply factors and the demand is reached, which will, therefore, ensure that the oil industry is not driven into obsolescence.

The market forces of demand and supply play a significant role in ensuring that the market value is maintained at a relatively average cost. For instance, by continuing the demand at a steady-state, the supply is regulated, thereby ensuring that the service providers do not provide an oversupply, resulting in a fall in the prices. Accordingly, a steady supply keeps the demand stable, thereby ensuring that consumers are not offered with the excess product, which consequently affects the pricing policies (Lioudis).

As a result, the Marathon Petroleum Corporation and other oil companies have found themselves in a compromising situation whereby the market aspects of demand and supply have been adversely affected, thereby compromising the profitability aspects of the whole business setting.

Conclusion

The Coronavirus epidemic has dealt a significant blow to the world's economic productivity with various sectors such as the oil industry being among the worst hit. Companies such as Marathon Petroleum Corporation have been forced to halt operations indefinitely until sustainable production levels are reached. The implications of these shutdowns are expected to have even far wider-reaching effects not only on the companies but also on the employees. As a result, to mitigate these challenges, which may have a resounding impact on the economy, the government should come up with measures that can sustain viable production for these and other industries until the effects of the virus outbreak are under control. This will ensure that the economy maintains itself, and the reviving measures will have a higher chance of working if a total economic breakdown is mitigated.

Works Cited

Krauss, Clifford. "'i'm Just Living A Nightmare': Oil Industry Braces For Devastation." Nytimes.Com, 2020, https://www.nytimes.com/2020/04/21/business/energy-environment/coronavirus-oil-prices-collapse.html.

"Gallup Refinery | Marathon Petroleum Refineries." Marathonpetroleum.Com, 2020, https://www.marathonpetroleum.com/Operations/Refining/Gallup-Refinery/.

Lioudis, Nick. "What Causes Oil Prices To Fluctuate?". Investopedia, 2020, https://www.investopedia.com/ask/answers/012715/what-causes-oil-prices-fluctuate.asp.

Hey, R. B. (2019). Turnaround Management for the Oil, Gas, and Process Industries: A Project Management Approach. Gulf Professional Publishing.