Oil Searching For A Bottom As Union Threatens More Walkouts
The strike at US refineries got a bit bigger over the weekend – all amid the mostvolatile, and now downward, price swings seen in the last six years. Investors have yet to lose hope in a sustainable rebound, but another prolonged fall may be looming ahead.
The United Steelworkers union (USW) and Royal Dutch Shell – big oil’s lead representative in the matter – failed to reach an agreement on wages, safety measures, and benefits last week. As a result, 1,400 workers at two BP-owned refineries joined the work stoppage on February 8. Since the beginning of the month, USW members have walked out of 11 refineries, leaving approximately 1.82 million barrels per day of refining capacity in the hands of retirees and last-minute, non-union replacement workers.
Still in its early stages, the strike has room to grow. The USW national contract – which expired February 1 – covers nearly 30,000 workers, 65 facilities, and around two-thirds of the nation’s refining capacity. The nature of the negotiations remains unclear, but the sides appear to be far apart. The union has already rejected five offers from Shell and threatened further walkouts if progress is not made.
To date, contingency plans and local bargaining have limited any drop in output – positive pressure on both crude and gasoline prices has been virtually non-existent. Instead, downward pressure caused by the work stoppage has only increased the recent volatility, muddying any understanding of the true bottom. The last strike, in 1980, lasted three months.
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