Oil companies, like any other business, exist to make a profit for their shareholders. Very few people nowadays believe that ‘profit’ is a dirty word or that making a profit through business is inherently wrong. There is, nevertheless, widespread suspicion of oil companies—especially multinational companies working in developing countries—for several good reasons:
Oil companies typically respond by saying that they make huge, long-term investments, with substantial risks—including the risk of political instability, or a government reneging on a previously agreed contract—and the companies often have to wait for many years before they see a return on their investment. This, they say, justifies high profit margins.
Although their main obligation remains to their shareholders, the major oil companies have, over the last 20 years, also formally adopted ‘corporate social responsibility’guidelines and practices. Some critics dismiss this as a mere public relations exercise – trying to improve their public image by building a few schools or clinics in areas whose oil they are extracting. However, corporate advocates of ‘social responsibility’ also argue that the long-term business interests of oil companies make ‘sustainability’ a vital concern for them: destroying the environment, alienating local communities and creating bad relationships with government are, simply, bad business strategies that will diminish, rather than increase, long-term profitability. And, certainly, the ‘oil majors’ are working hard to re-cast themselves as friends of the environment, ‘energy companies’ rather than ‘oil companies’, and harbingers of a cleaner, greener world. (See, for example the Chevron advertisements currently broadcast on DSTV.)
Most economists, however, would still insist that it all comes down to economic incentives. If an oil (or ‘energy’) company can drive a bargain on highly favourable terms, it will. Some people call this cheating. Others just call it business.