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Pacific Oil Company Essay

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Updated: Mar 29th, 2019

Back in the days, petrochemical processes were determined by a detailed elaboration of prices known as formula prices, it comprised of several element. The first one being feed stock characteristics; feedstock supply varied in chemical composition.

The difference in the feedstock considerably affected the procedures of refining and operating efficiency. A few chemical products were drawn from a chosen feedstock. Increased number of orders necessitated the mixing of combined feedstock together with distinct structural characteristic.

Fuel cost was inclusive of price and quantity of energy that the manufacturing corporation expected in cracking, producing a particular steam and refining.

Labor cost was part of employees’ salary, to operate the manufacturing with the objective of generating a fixed unit amount of a particular product. Value of petrochemical was determined by the commodity cost, as the demand and supply fluctuated in the market; this factor was again featured in the formula price.

The computation of the price formula, as opposed to determining a market price had a list of advantages and disadvantages. It permitted the supplier to surpass expenses charged to buyer; this minimized the risks for the engaged parties, in the case of express fluctuation of prices throughout the period of the contract.

When market demands went down, contract guaranteed a wide market to the supplier; however, the price for the product was to some extent unbeneficial in comparison to product cost.

When it came to quantity, formula prices were typically computed, their major focus was given to quantity. Costs changed significantly, this was however dependent upon the efficiency of the production taking place. Payments were to be issued in dollars without deduction or discount, except only if noted.

Some of the challenges pacific oil faced in early 1985 with Reliant chemical company were quite a number. Pipelines routine inspection had been subcontracted to a company with quality equipment for monitoring things like leaks.

It happened that leaks had been detected in late December prior the year; this extended the effect to early 1985. The executive of the company were out of reach for many days hence the problem could not be solved immediately until a certain period of time.

There was a concern with the system of delivery, and the way meter reading was being conducted. Pacific oil built a line and was in charge of maintenance, installation of meters was done towards the outlet of the pipeline, and Reliant was giving metered total to Pacific.

According to Zinnser some spot checking at the manufacturing facility indicated that they were not getting all that they were billed for. They later discovered that, the integrity of the meter or the meter reader wasn’t question but, felt that since the pipes had been in existent for years, there was a possibility they had develop leaks.

The executive vice president became distressed over the turnout of events. Pacific headed for tremendous destruction. Realizing the techniques of challenging it would be to maintain strong negotiations, a review of the negotiations were done were done on Reliant contract.

They also experienced delay when Hauptmann lost his mother; meetings were rescheduled as a result hence, there was a delay. The investigation of pipeline gave no evidence of a considerable discharge. It only traced minor leaks, which did not seem serious. It was impossible to identify the percentage of the product lost in the process.

Emotion in negotiation is one of the styles used in the case. Emotions carries the capacity to contribute either positively or negatively in negotiation.contribute either positive or negative in a negotiation scenario. According to Fisher, and Shapiro (2005) negative emotion at times leads to intense or irrational behavior, resulting to escalation of conflict.

This is evident in the conversation that takes place between Kelsey and Fontaine as emotions flare an in turn leads to unhealthy and even unnecessary confrontation.Distributive negotiation is another style used; the term distributive basically means giving; or scattering things.

Fisher, and Shapiro (2005) further states that there is a limitation in things being distributed; it entails individuals who have never before had an interactive relationship.

And there isn’t a likelihood of doing so in the future. In this form we see each individual fighting to have their way; it is appropriate but, requires an extent of limit in order not to regard the other side as an enemy but a partner.

According to Shell, R.G. (2006) integrative negotiation means joining several parts and making the whole, this implies some cooperation or teaming up to achieve a common goal. More often than not, trust is of a higher degree in shaping of the relationship.

Both parties walking away feeling a sense of achievement, ideally the process has two phases. The process entails value concession, plus creative problem solving. This is the style that is mainly used by Guadin, Hauptmann, and Zinnser in their negotiations.

Instead of Kelsey allowing emotions to flare, what he could have recommended to Fontaine were few and simple facts.

The reality being that, a supply contract binds legally, it’s a document that only attempts to elaborate on strategies or ways the two companies can work together, and hence it is the foundation of an intricate long term relationship that exists between a seller and a buyer. He could have informed of the constant monitoring, discussion and evaluation required by representatives of the organizations.

He could have further recommended that it is possible for the purchaser to meet the conditions of the negotiated contract. This is can be made possible since the purchaser can accept a fair price formula, without attempting to push the supplier to an artificial low price. He is trustworthy pursue an action plan, basing it on sound business ethics as agreed in the contract.

The purchaser cannot take advantage of aberrations in the spot market, they will have no choice but accept the reality of a formula price having been negotiated, and both parties agreeing to live up to the negotiated contract over the suggested period of time.

Problems encountered in product quality, labor difficulties can result to challenges in manufacturing, unloading and loading, shipping and cleanliness of shipping tools. This can however be explored to mutual satisfaction.

Furthermore, change in business projection of both parties can be shared hence; the complexity anticipated by the supplier in producing the products can be solved. On the other hand the difficulty encountered by buyer in consumption of the product can also lead to amicable solution for both parties.

Finally, the ability to solve these problems necessitates mutual trust, open communication and honesty. And most importantly an approach that offers the best solution to both the parties.


Fisher,R. and Shapiro, D (2005) Beyond Reason: Using Emotions as You Negotiate.New York: Penguin Books.

Shell, R.G. (2006). Bargaining for advantage. New York: Penguin Books.

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1. IvyPanda. "Pacific Oil Company." March 29, 2019. https://ivypanda.com/essays/pacific-oil-company/.


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