Unformatted text preview: Are Alternative Fuels More Profitable for Business's?
Raymond Gonzalez Managerial Accounting The number one reason that business' are Why Change to Alternative Fuels not based on Petroleum Oil?
looking for alternatives to oil is because we are running out of this natural nonrenewable resource fast. As a result of this "oil shortage", oil, gas, and other fuel prices that are used with oil have been sky rocketing. Higher oil prices mean higher costs for business'. Skyrocketing Oil prices What's wrong with Oil? Outside the fact that oil prices are naturally increasing, many countries such as Japan, Britain, and even the U.S are beginning to put in place laws that reward the users of alternate fuels while taxing the companies that continue to use petroleum based fuels. Although not really related to a company's costs or profits, the use of oil has been and still is a huge contributor to global warming. Due to this fact, some people are beginning to believe that continual use of oil into the future by business', is a morally wrong and even unethical practice. Although many companies are deciding whether they What Should They do? should make the switch from oil to alternative fuel sources, we will take a look at BP (Beyond Petroleum). BP an energy company that mostly produces oil and gas energy today, is proposing to turn toward a new source of energy called biobutanol (a bio to liquid fuel). The question for BP is whether it will be more profitable to pour large amounts of funding (we're talking millions, possibly even billions) into the R&D and production of biobutanol now or if it would be by just sticking the production of oil until BP has no choice but to change to an alternate source. To Change or Not to Change With increasing oil prices, biobutanol will be the cheaper type of energy in the long run. Can be mixed with other forms of energy such as gasoline = more convenient for car manufacturers. Since biobutanol is made from plants, it can be made at home. Is an Environmentally friendlier resource which would produce more customers and maybe reduce taxes. BP will have to invest lots of money into the development of biobutanol in the short run. Is at best a stopgap in the search for a replacement resource to oil. Will affect the agriculture industry as plants will need to be grown in order to be used as energy = more land needed. What should BP Do? After evaluating both the strengths and shortcomings of switching from oil to biobutanol, BP would find that it is in their best interests to switch to biobutanol in the long run. Even though it will be very expensive to make the initial switch, BP will find that biobutanol will not only be cheaper to produce and transport but will also yield the company more customers in the long run. These benefits along with the fact that the company will eventually have to switch away from oil as it's prices continue to increase, make biobutanol the more profitable choice in the long run. Questions?
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- Spring '08
- Managerial Accounting, Alternative fuel, Oil prices