Gasoline prices have yet to show the impact of an expanding refinery strike, but that could change within the next few days.
“By the end of this week, if we still see the strike, we’re going to see prices rise a little bit faster,” said Carl Larry, director of oil and gas for global consultants Frost & Sullivan.
The United Steelworkers strike, which spilled into Louisiana over the weekend, began Feb. 1 — about the time refineries began shutting down for seasonal maintenance work, Larry said. Gas prices are up about 20 cents a gallon since then, but that’s because of maintenance and not the strike, he said.
Refiners haven’t been concerned about the strike because plants were already down for repairs. But as the labor dispute moves into March, production is really going to be affected, Larry said. That’s because the refineries that were supposed to come back online after turnarounds will be prevented from doing so.
This weekend, the strike widened to include the country’s largest refinery, Motiva Enterprises in Port Arthur, Texas, as well as 800 USW members at Motiva’s Louisiana refineries in Convent and Norco and a Shell chemical plant in Norco. The strike already included 5,200 USW workers at 11 facilities. The union represents workers at 65 U.S. refineries, and those facilities process two-thirds of the country’s oil.
Larry said he expects the strike will last at least another week or two.
Based on a USW schedule of expiring contracts, the only additional Louisiana facility coming up over the next two weeks would be Valero’s Meraux refinery. The refinery’s contract expires on March 1. Chevron Chemical’s Belle Chasse plant contract expires March 31.
In response to questions about when other Louisiana refineries might get a strike call or be rolled into the negotiations, USW spokeswoman Lynne Hancock said the union doesn’t reveal its strategy.
USW officials say the strike is the result of unfair labor practices. Rather than hire more people, refiners force employees to work overtime, and overly fatigued workers are more likely to have accidents. The USW says industry negotiators refuse to discuss serious concerns raised by the union regarding the health and safety of workers and their communities.
However, industry negotiators say the key sticking point is contract workers who do daily maintenance. The USW wants to replace the contractors with union members.
To date, nearly 6,600 USW workers are engaged in an industrywide unfair labor practice strike at 15 refineries and chemical plants in Ohio, California, Indiana, Kentucky, Louisiana, Texas and Washington.
Randy Peterson, a Baton Rouge consultant who tracks Gulf Coast industrial developments, said if there was an issue with a shortage of gasoline supplies, he would expect to see exports fall, and that hasn’t happened.
Refiners, particularly those in the Gulf Coast, have enjoyed healthy margins despite crashing oil prices and the biggest nationwide refinery strike since 1980. Gulf Coast refineries are benefiting from increased demand for diesel from Latin America. The most recent figures from the U.S. Energy Information Administration show that in November, Gulf Coast refiners exported about 1 million barrels of diesel and 400,000 barrels of gasoline a day.
Larry said no one can really say how much refinery production is being affected by the strike. But if the refineries were having to run at a normal capacity for the summer driving season, as much as 25 percent of production capacity, or 3 million barrels a day, probably would be offline, he said.
Follow Ted Griggs on Twitter, @tedgriggsbr.