Posted on 02/02/2015 5:08:06 AM PST by thackney
Steelworker strikes that began Sunday at seven U.S. oil refineries and two chemical plants have a slim chance of pumping up gasoline or crude prices dramatically in the near future, analysts say.
Talks between the United Steelworkers union and big oil companies led by Royal Dutch Shell broke down Saturday after the two groups couldn’t reach an agreement on – among other contractual issues – the overtime that workers have to take when others are called away to train new recruits, a point “when the fatigue sets in,” union spokeswoman Lynn Hancock said.
But the refineries, analysts said, can keep running using automated processes with a skeleton crew of managers and employees from other parts of the companies – a factor that will likely keep U.S. gasoline supplies intact for the most part.
“I’ve never seen a strike impact supply,” said Tom Kloza, chief oil analyst at Oil Price Information Service in New Jersey. “There may be a generation of traders that react to it because they think refiners are going to cut back. But I think we’ll see a consistent level of demand from refineries.”
Last week, the nation’s output of petroleum products, including gasoline, diesel jet fuel and heating oil, was 14 million barrels a day, according to Gasbuddy.com. The seven oil refineries where union leaders called strikes Sunday have a combined refining capacity of 1.94 million barrels of petroleum products a day.
Three of the oil refineries – Royal Dutch Shell’s Deer Park Refinery, Marathon Petroleum Corp.’s site in Texas City, and a LyondellBasell refinery – are in the Houston area, with the capacity to churn out 1.05 million barrels of products a day.
“It’s a number that has to be reckoned with if you think about how much of that is used in the southeast and the southwest,” said Gregg Laskoski, senior petroleum analyst for Gasbuddy.com. “When you take out that much production in Texas it does have the potential to be disruptive.”
On Sunday afternoon, small groups of union employees picketed several entrances to Shell’s Deer Park refinery. The picketers carried standardized signs proclaiming an “unfair labor practices strike” against Shell, and milled back and forth along the barbed-wired entrances to the chemical plant.
A few miles to the north, another group of twenty picketers stood outside the LyondellBasell refinery’s main entrance – some wearing the all-blue coverall uniform of the Lyondell plant.
United Steelworkers spokeswoman Lynne Hancock said around 3,800 workers were affected by the strikes at the nine facilities. She said there haven’t been any meetings scheduled yet to open talks back up between the union and the oil companies.
Destin Singleton, a spokeswoman at refiner Tesoro Corp., said the company has a contingency plan that “has prepared us to safely operate our facilities.”
“We have successfully made the transition and are operating our Carson refinery,” Singleton said. “We plan to be operating (facilities in) Mandan, Anacortes and Martinez within the next 24-48 hours. We will continue to supply the market and fulfill our customer commitments.”
Tesoro later said that since its Martinez refinery is in turnaround, with half of the plant shut down for planned maintenance, the safest operating option for that refinery is to shut down the rest of it.
In an emailed statement, Shell spokesman Ray Fisher said the company and the union have agreed to extend the existing labor contract for at least the next 24 hours while negotiations continue. But the strike at its Deer Park site has “activated a contingency plan to continue operations in the normal course of business.”
“We remain committed,” he said, “to resolving our differences with USW at the negotiating table to reach a mutually satisfactory agreement.”
Jamal Kheiry, a spokesman for Marathon Petroleum Corp., said the company has plans in place to “ensure the continued safe operation of its facilities and stands ready to continue negotiations at the local level.”
The strikes could bring oil companies to the table eventually, as about 40 percent of U.S. refineries are run by Shell and other Big Oil firms that have seen profits diminish from their upstream operations, as oil prices have collapsed in recent months, said Rob Desai, an analyst with Edward Jones.
“That’s where the struggle is,” Desai said. “I think that’s where you might see a bit more back and forth.”
Desai said he doesn’t expect the strikes to impact the refiners’ output much, at least for a while, and probably won’t impact gasoline prices.
Still, Kloza of Oil Price Information Service said, reduced refining output in the United States is the last thing North American shale energy producers and their tool suppliers want to see, as they’re already cutting billion-dollar capital budgets and laying off thousands of workers to adjust to a global glut in crude supplies.
“Crude prices are under incredible gravitational force right now,” Kloza said.
Gasoline prices could see additional upward momentum after the strikes, but that should fade once traders realize the strikes have only been called at nine out of 140 sites across the country, said Andy Lipow, president of Lipow Oil Associates in Houston.
“People don’t remember what happened in the 1980s,” Lipow said, referring to the last time widespread oil refinery strikes occurred in the United States. “The refineries ran fine and the impact was minimal. That strike was nationwide; this will have much less of an impact.”
Still, in the midst of an oversold gasoline market, any news about the potential slackening of gasoline supply could create a “pop” in the price, said Phil Flynn, an oil analyst at Price Futures Group in Chicago.
Lipow said the union will have less leverage now than it would have when oil prices were hovering around $100 a barrel, as layoffs in the oil field service industry has widened the labor pool in recent weeks.
“A welder in a refinery has the same skills out at the rig,” Lipow said. “Many of those skills are transferable.”
Still, the union may decide to expand the strike to other facilities, as its membership covers refineries and chemical plants that make up 65 percent of the nation’s output of petroleum products. Or it may rotate which facilities it calls for a strike, to ease the economic burden on its workers while keeping pressure on refiners. But for now, the clock is ticking on how long workers and their families can stick it out, said Steve Roppolo, regional managing partner at Fisher & Phillips in Houston.
“I sometimes question their capacity to hold out for long periods of time,” Roppolo said. “The economic pressure they try to place on companies, they also place on themselves. Many families live paycheck to paycheck. You may see people crossing the line.”
Plus, a long, drawn-out strike is a risky strategy: If employees choose to stick it out, they could be permanently replaced, Roppolo said.
“This is kind of an opening blow,” he said. “But if I had to guess, I would think it will be a relatively short lived action.”
Robert Grattan contributed to this report.
Yah, Hack, but this flap w/the steelworkers WILL introduce more volatility into the mkt...which the crude mkt, particularly, doesn’t need at this time.
Gotta hand it to Leo Gerard. Unlike most union leaders, he seems to know which groin to thrust his knee into.
Average wages, just saying.
http://www.bls.gov/oes/current/oes472221.htm
LyondellBasell said in a statement that: “a contemporaneous and orderly transition took place at our Houston Refining site, and the company has now activated a well-developed and pre-prepared work continuation plan at the site that will ensure we continue to operate safely and provide uninterrupted service to meet the needs of our customers.
The Steel Workers are striking the oil refiners
Something seems wrong about that statement
I don’t think the pay rate is the issue for the strike.
The refiner’s national negotiations have hinged on safety issues and the amount of overtime refinery workers have been asked to work, Oliver said. Locally, Steelworkers has pushed LyondellBasell on a number of issues including employee benefits and hiring contractors, Oliver said.
USW represents workers at 65 fuel-making plants around the U.S. which it says account for nearly two-thirds of the country’s refining capacity.
That article said nothing except that they are striking. Over what?
http://job-descriptions.careerplanner.com/Structural-Iron-and-Steel-Workers.cfm
Let me correct myself, pay raises is part of the negations.
http://www.reuters.com/article/2015/01/31/refineries-labor-strike-notices-idUSL1N0VA0HF20150131
...The drop in oil prices since this summer may have cut the union’s ability to win its objectives, said an oil industry analyst.
“I think the union would have had a lot more leverage six months ago when the price (of oil) was $100 a barrel,” said Andrew Lipoid, president of Lipoid Oil Associates in Houston. “But now, when the industry is facing hard times and layoffs have been announced, their bargaining power is limited.”...
The USW is seeking annual pay raises double those of the last agreement. It also wants work that has been given in the past to non-union contractors to start going to USW members, a tighter policy to prevent workplace fatigue, and reductions in members’ out-of-pocket payments for healthcare.
The starting pay for USW member in an oil refinery is about $37.50 an hour.
At least three contract offers have been rejected by USW negotiators since contract talks began on Jan. 21. The most recent rejection was on Friday.
A strike is not expected to affect operations at refineries where workers walk off their jobs, said a refining consultant.
“I am not aware of any examples when refineries have not continued operating with replacement workers rather than union workers,” said David Hackett, president of Stillwater Associates, an Irvine, California, refining consultancy.
“This work stoppage is about onerous overtime; unsafe staffing levels; dangerous conditions the industry continues to ignore; the daily occurrences of fires, emissions, leaks and explosions that threaten local communities without the industry doing much about it; the industry’s refusal to make opportunities for workers in the trade crafts; the flagrant contracting out that impacts health and safety on the job; and the erosion of our workplace, where qualified and experienced union workers are replaced by contractors when they leave or retire,” Beevers added.
Thack, I’m not arguing with you I’m still wondering what the possible strike is about. With that article all I’m seeing is that some may be laid off?
Ok so they are striking over unsafe conditions, I read a different article. But it’s still about pay. Ok I guess you gotta do what you gotta do. Slitting their own throats.
Been there...
Imagine if all workers from other industries making less than $37.50 starting salary went out on strike.
Watch this closely folks...obola said not to get used to cheap gasOLINE.....oil supplies are fine but fuel is a dif story. Stand by!
Have you heard about the west coast dock workers/longshoremen strike? It is severely effecting shipments in and out of Long Beach, Oakland, Portland and Seattle/Tacoma. This is both inbound and outbound. These dock workers on average make $140K/year.
It is costing the economy millions. I know of one lumber company that is having to ship up to Vancouver on all lumber that was previously shipping form Portland & Seattle. Just the difference in trucking alone is thousands each week. Again, this is just one lumber producer in OR/WA. Multiply that per thousands of incoming and outgoing containers. It is having an effect on the GDP.
It moved gasoline prices here in Tulsa, Oklahoma with a 10¢ jump overnight!
I don't think that is the reason. Oil prices jumped up some on Friday before the strike.
Oil Prices Surge 8% After Long Slide Down
http://www.nytimes.com/2015/01/31/business/energy-environment/oil-prices-surge-8-after-long-slide-down.html?_r=0
And again today
Oil prices rally above $55 as investors pile in
http://finance.yahoo.com/news/oil-prices-fall-more-dollar-003609455.html
I guess we hit the bottom ... :-) ...
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