1. How does managing ethical risk in the oil and gas industry relate to reducing accidents?
2. How can ethical leadership help the oil and gas industry to manage risk?

Despite the many controversies surrounding the economic and environmental effects of drilling for oil and gas, there is no denying the world’s dependence on these commodities. It is estimated that total global demand for natural gas will reach over 4 trillion cubic meters by 2017. Global crude oil demand is already at 90 million barrels per day. While petroleum products are most often associated with machines or factories, they are also used to produce commercial products including plastic, pesticides, fertilizers, and even certain pharmaceuticals.

Unfortunately, the world’s dependence on oil and gas has created significant challenges. The demand for oil depletes the world’s oil reserves at an alarming rate; while there appears to be little agreement on when the world’s oil reserves will be completely depleted, fears that demand is quickly outstripping supply have increased the drive toward investigating alternative energy sources. Additionally, the oil and gas industry has many risks. Safety is a large concern, and major accidents have caused the gas and oil industry to be heavily criticized.

However, one of the greatest concerns of the oil and gas industry is the environmental risks associated with it. Drilling operations are accused of contributing to water pollution and the release of air contaminants into the atmosphere. These greenhouse gases in turn contribute to the warming of the Earth’s atmosphere, leading to greater risks of polar ice cap melting, flooding, and other environmental damages. Yet what attracts the most attention are when oil and gas companies experience major disasters leading to massive environmental damage—namely, oil spills. Because many of the world’s oil reserves are located beneath the ocean—requiring petroleum companies to use drilling rigs to extract the oil from beneath the surface of the ocean floor—any leak has the potential to create serious harm in a quick amount of time. Petroleum companies must guard against these industry specific risks.

As a result of these risks, the oil and gas industry adopted safety procedures and processes meant to reduce their environmental impact and prevent these disasters from occurring. However, ethical lapses on the part of these companies have led to major environmental mishaps. The first oil spill that gained widespread attention in the United States was the Exxon Valdez spill, important not only for its environmental impact but also for increasing the liability and responsibility oil companies have for cleanup and restoration. Despite the lessons learned from the Exxon Valdez spill, two decades later an accident on the Deepwater Horizon oil rig managed by BP led to the worst oil spill in U.S. history to date.