Oil Refinery Workers New Labor Contract

Union negotiators for oil refinery workers have tentatively agreed to a new contract which represents approximately 24,000 union members.

The new contract deals with labor issues like wage and benefit levels, which the details of the agreement weren't released.

If there had been a strike, it would have affected up to 10 percent of the overall refining capacity in America's oil industry. Other reports say the strike could have affected close to two-thirds of the capacity to make fuels in general, gasoline and diesel.

Details of the oil refinery workers deal will be released sometime on Wednesday by their representatives of the United Steelworkers union. Signing off on the deal was the National Oil Policy Committee, which still has to be ratified by local union units.

Some of the large oil and gas companies that would have been affected by the strike were Exxon Mobil (nyse:XOM), Royal Dutch Shell (nyse: RDSA), BP (nyse:BP) PLC, Valero (nyse:VLO), and Chevron (nyse:CVX), of close to 60 oil producers in general.

Besides higher wages, other issues being negotiated for the oil refinery workers were cost-of-living increases and full benefits for medical, dental and vision; both for current and retired oil workers.

The deal was worked out with Shell Oil, which will also be extended to the other plants, including Valero Energy Corp., Exxon Mobil Corp., Chevron and BP Plc. The deal, if approved, will keep up to six refinery plants from closing, and about 1.7 barrels a day from going off line.

Some of the known parts of the contract are a three percent raise for each of the three years of the contract, along with a signing bonus of $2,500 if it is approved before February 16.

Fuel and oil demand has fallen so much that the refineries have slowed production after falling prices put downward pressure on margins. Oil processors have had a record number of days of making gasoline at a loss, measured by futures prices.

The two largest refiners in America, ConocoPhillips and Valero were leading the fuel production cut in oil refinery output.

Gas prices had surged by 10 percent last week as the possibility of a strike loomed over the oil and oil refinery industry.

On the New York Mercantile Exchange, gasoline for March delivery increased 1.68 cents to $1.166 a gallon. Gas prices across the nation grew to $1.89 a gallon according to AAA.

Now that a strike is probably averted, we should see a corresponding fall in gasoline prices as demand continues to fall.

If things do change economically, this new contract could be a diaster for union members, as higher operating costs through increased wages and benefits could put many oil refinery workers out of a job in the months ahead. But that's how unions always work, as they overreach and cause loss of jobs, while benefitting only some of the members.

For the week ending January 16, oil refinery production had operated at 82.5 percent of capacity, down significantly from the 85.2 percent the week before. It'll a long time before gas and oil demand increase in any major way.

Motorists in the U.S. continue to drive much less, as for the second year they've driven at a lower rate than the previous year. According to the Federal Highway Administration, vehicle miles have plunged by 5.3 percent or 12.9 billion miles. We should see that continue on, and oil refineries operating at even less capacity before it turns around.