Refinery strike pushes up wholesale gasoline prices
Gasoline traders reacted quickly to the first nationwide oil refinery walkout in more than three decades, pumping up wholesale prices to their highest level in more than a month.
But analysts questioned whether there would be longer-lasting consequences at the pump, where the cost of filling up a tank has been rising in recent days after sliding for months.
Workers at nine refineries — including two in California — remained on strike for a second day Monday amid a standoff between the United Steelworkers union and oil companies over contract negotiations.
Uncertainty in the markets over the strike helpedpush wholesale gasoline prices for March delivery up 6.58 cents to the highest level for a next-month delivery since Dec. 23.
Historically, refineries have continued operating during strikes. And retail gasoline prices were already rising even before this week’s walkout, reaching a national average of $2.06 for a gallon of regular on Monday, the seventh consecutive daily increase.
In the Los Angeles area, gas prices hit $2.48 Monday, compared with $2.47 a week earlier, according to the AAA Fuel Gauge report.
The upswing will likely continue — largely because of refineries closing for regular seasonal maintenance, analysts said. If the strike doesn’t affect refinery activity, wholesale prices and prices at the pump won’t rise any more than they normally would, said Brian L. Milne, an energy editor with Schneider Electric.
“There is always a knee-jerk reaction,” Milne said.
The USW union called Sunday for work stoppages at a cluster of refineries that together account for 10% of nationwide refining capacity. Some 3,800 workers are participating, according to spokeswoman Lynne Hancock.
In all, the 65 refineries represented by the USW are responsible for two-thirds of the nation’s refining capacity.
USW’s three-year, national contract with oil companies, which covered 30,000 workers, expired Sunday. Since renewal talks began Jan. 21, the union has rejected five proposals from Royal Dutch Shell, the lead negotiator for the industry.
Shell did not return requests for comment.
On Saturday, USW sent to its members a text message calling the latest proposal “insulting” and saying it failed to address many of the topics the union had brought to the table. Pay is an issue in contention but “has nothing to do with why we walked,” Hancock said.
“Wages are not a part of this work stoppage whatsoever,” she said.
The union wants oil employers to reduce out-of-pocket healthcare costs for employees and implement stronger policies preventing worker fatigue, which Hancock said is exacerbated by long hours and low staffing levels. USW negotiators are also asking that union members be hired and trained for positions being offered to contractors.
The walkout — spanning facilities owned by companies such as Tesoro Corp., Exxon Mobil Corp., Marathon Petroleum Corp. and LyondellBasell Industries in states such as Kentucky and Texas — is the first of its kind since 1980.
At Tesoro’s Carson facility, some 800 workers are striking. But workers have not walked out at the company’s smaller Wilmington site nearby.
The two facilities sit on 930 acres near the Port of Long Beach and together constitute the largest refinery on the West Coast. They employ 1,450 full-time workers and can handle 363,000 barrels of crude oil each day.
In the Bay Area, the USW targeted Tesoro’s Martinez refinery, half of which was closed for maintenance. The facility, spread across 2,200 acres, can process 166,000 barrels per day.
Tesoro spokeswoman Tina Barbee said the company decided the “safest operating option” was to idle the remaining processors in Martinez. The San Antonio company said its refineries in Carson and Anacortes, Wash., continue to run with “fully qualified staff,” she said.
California had 18 operable petroleum refineries last year, according to the U.S. Energy Information Administration. Only Louisiana and Texas had more.
In 1980, the three-month strike affected gasoline prices “a couple of pennies at best,” said Phil Flynn, an analyst with Price Futures Group.
But if the walkout, which could spread to other facilities, continues for an extended period, refineries may run into trouble maintaining production with skeleton crews, analysts said.
“We don’t know what the impact is going to be,” Flynn said. “We are not seeing any major impact on production yet, but that could change.”
Gas prices could disproportionately increase in regions that are directly supplied by local refineries, Milne of Schneider Electric said.
“California is going to feel this a little more.... It’ll be a refinery-by-refinery situation,” he said, noting the Martinez closure helped send current wholesale gas prices for the San Francisco area up 17 cents from Friday.
Consumers had enjoyed a record 123 consecutive days of gasoline price declines before fuel prices began rising last week for the first time since Sept. 25, according to AAA. Prices are generally low during the winter months, when many Americans avoid driving and travel and gasoline supplies build up.
A supply glut of oil has also been a factor. The price of Brent crude — which was above $100 a barrel this summer — plunged to below $50 this month. On Monday, it rallied 3.3% to $54.75 a barrel amid hopes that a bottom had been reached.
Major oil-field services companies such as Schlumberger and Halliburton have laid off thousands of workers as production has been curtailed.
But refineries, unlike the drills and pumps out in the oil fields, are part of what’s known as the downstream oil sector. More than 41,000 payroll employees operate or control petroleum refining or processing units nationwide, according to the U.S. Bureau of Labor Statistics. On average, they earn $61,350 a year.
More than 10% of that workforce is based in California, where the average worker earns $73,130 annually. More than 1,600 such employees work in the Los Angeles metropolitan area — the fourth largest concentration in the country.