(Bloomberg) -- The United Steelworkers union, which represents employees at more than 200 U.S. oil refineries, terminals, pipelines and chemical plants, began a strike at nine sites on Sunday, the biggest walkout called since 1980.
The USW started the work stoppage after failing to reach agreement on a labor contract that expired Sunday, saying in a statement that it “had no choice.” The union rejected five contract offers made by Royal Dutch Shell Plc on behalf of oil companies including Exxon Mobil Corp. and Chevron Corp. since negotiations began on Jan. 21.
The steelworkers’ union hasn’t called a strike nationally since 1980, when a stoppage lasted three months. A full walkout of USW workers would threaten to disrupt as much as 64 percent of U.S. fuel production. Shell and union representatives began negotiations amid the biggest collapse in U.S. oil prices since 2008.
“The problem is that oil companies are too greedy to make a positive change in the workplace,” USW International Vice President Tom Conway said in the statement. “They continue to value production and profit over health and safety, workers and the community.”
Ray Fisher, a spokesman for The Hague, Netherlands-based Shell, said by e-mail on Saturday that the company remained “committed to resolving our differences with USW at the negotiating table and hope to resume negotiations as early as possible.”
Union Goals
The USW asked employers for “substantial” pay increases, stronger rules to prevent fatigue and measures to keep union workers rather than contract employees on the job, Gary Beevers, the USW international vice president who manages the union’s oil sector, said in an interview in Pittsburgh in October.
The refineries called on to strike span the U.S., from Tesoro Corp.’s plants in Martinez, California; Carson, California; and Anacortes, Washington, to Marathon Petroleum Corp.’s Catlettsburg complex in Kentucky to three sites in Texas, according to the USW’s statement.
The sites in Texas are Shell’s Deer Park complex, Marathon’s Galveston Bay plant and LyondellBasell Industries NV’s Houston facility, according to union. The walkout also includes Marathon’s Houston Green cogeneration plant in Texas and Shell’s Deer Park chemical plant.
10% of Capacity
The refineries on strike can produce 1.82 million barrels of fuel a day, about 10 percent of total U.S. capacity, data compiled by Bloomberg show.
“There will be a knee-jerk reaction in gasoline and diesel prices because we don’t know how long this is going to be or how extended it might be,” Carl Larry, Houston-based director of oil and gas at Frost & Sullivan, said by telephone Sunday. “It’ll be bearish for crude, but we’ve already accounted for a lot of the fact that refineries are maintenance.”
The U.S. benchmark West Texas Intermediate oil rose $3.71 a barrel, or 8.3 percent, on the New York Mercantile Exchange to settle at $48.24 on Jan. 30. Gasoline for March delivery gained 8.75 cents a gallon to $1.4788, and the diesel contract for the same month was up 9.61 a gallon to $1.7008.
More refineries are standing by to join the sites on strike, according to two people familiar with the plan who asked not to be identified because the information isn’t public. The remaining USW-represented sites are operating under rolling, 24- hour contract extensions, the USW said.
Indiana Refinery
USW members at BP Plc’s 405,000-barrel-a-day Whiting refinery in Indiana notified management of their plan to strike at 11:59 p.m. local time on Sunday, Scott Dean, a spokesman for the London-based company, said by e-mail Sunday. Notice allows workers to prepare for a walkout and doesn’t necessarily mean a strike will occur, according to the union.
Shell activated a contingency plan to continue operations at the Deer Park refinery, Fisher said on Saturday.
Beevers said in October that he was expecting “the most difficult negotiations that I’ve seen” as workers fought for better pay and benefits. Local USW units established funds to help compensate workers during a strike for the first time in at least 20 years.
Refiners’ shares on the Standard & Poor’s 500 have more than doubled since the beginning of 2012, when the steelworkers last negotiated an agreement. Marathon and Tesoro went on that year to take their places among the 10 best performers in the S&P 500 Index.
Production Boom
U.S. fuel producers have been cashing in on the biggest- ever domestic oil boom, driven largely by volumes extracted from shale formations using hydraulic fracturing and horizontal drilling. The surge in output has lowered U.S. oil prices by 55 percent since June 20 and contributed to a global supply glut that has also sent international prices tumbling.
During the last bargaining year, United Steelworkers and Shell took about a month to reach a national agreement. The USW rejected at least four offers that year before agreeing to a contract that called for pay increases of 2.5 percent in the first year and 3 percent in the second and third years.
The national agreement, which addresses wages, benefits and health and safety, serves as the pattern that companies use to negotiate local contracts. Individual USW units may still decide to strike if the terms they’re offered locally don’t mirror those in the national agreement.
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