Engineering News

Refiners, Union Reach Agreement To Avert Strike
January 31, 2012

U.S. refiners and the United Steel Workers came to a tentative agreement on contracts hours before deadline Tuesday, averting a strike that could have brought a large chunk of refining capacity offline.

The tentative agreement for new three-year contracts was announced at 8:30 p.m. EST. Failure to reach an agreement by midnight could have caused a strike that would resulted in more than a million barrels a day of combined refining capacity being taken offline at plants run by Exxon Mobil Corp. (XOM), Valero Energy Corp. (VLO), BP PLC (BP), Chevron Corp. (CVX), ConocoPhillips (COP), Tesoro Corp. (TSO) and others.

Union spokeswoman Lynne Hancock said details of the agreement wouldn't officially be released until union members voted to accept the agreement, a process that could take weeks. The union had been pushing for stronger safety measures in an industry that has had 18 reported deaths since 2009.

Shell Oil, the U.S. arm of Royal Dutch Shell (RDSA, RDSA.LN), was the lead negotiator for the refining industry. Refiners this year had expressed confidence that a deal would have been struck before the deadline.

"We didn't expect to be a work stoppage," said Bill Day, Valero spokesman, which had two refineries under contract negotiations. "Both sides were committed to trying to get a deal done."

Both sides of the negotiations had made preparations in case of a work stoppage. ConocoPhillips, Chevron and others had trained salaried workers to run the refinery machinery in case of a union walkout. Union members at Exxon Mobil refinery in Billings, Mont., made picket signs for the event, according to local media.

The USW's last national labor action was a three-month strike called in January 1980. Refiners were able to keep some plants running by bringing in salaried personnel trained on how to operate the refining machinery, a tactic some were planning to revive for possible use if talks broke down this year.

Gasoline futures on the Nymex settled at $2.8874 a gallon on Jan. 31, up 2.7% since Jan. 24, as the threat of a strike loomed. Nymex heating oil prices, to which diesel prices are pegged, settled at $3.0682 a gallon on Jan. 31, up 1.7% during the same period. Both were in contrast to the slight decrease in benchmark crude oil West Texas Intermediate. WTI settled Jan.31 at $98.48/bbl, down 0.4% from Jan. 24.

But market analysts say that even if a strike occurred, the combination of low fuel demand and well set-up contingency plans put in place by refiners should avert big price jolts in fuel markets.

Source: Dow Jones Newswires

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