Refinery workers' strike a challenge to Obama

The United Steelworkers Union has called a strike at refineries accounting for about 10% of refining capacity in the United States.  The USW has organized refinery workers, having driven down employment in the steel industry to a fraction of what it once was.  For a couple of decades, American steel workers enjoyed wages way above average, but in the end, as steel companies cut back on investment, the old blast furnaces went idle one after the other, and non-union electric furnaces, along with foreign steel companies, took market share away.

Before going on strike, the union had rejected four previous contract offers from Shell, which is acting as the lead for the industry as a whole.  Whatever settlement is reached at Shell will serve as the pattern for other refiners, a pattern that has served in other industries like autos and steel (which have also lost major shares of union jobs).

The USW is seeking annual pay raises double the size of those in the last agreement. It also wants work that has been given in the past to non-union contractors to start going to USW members, a tighter policy to prevent workplace fatigue, and reductions in members' out-of-pocket payments for healthcare.

We hear a lot about “greedy oil companies,” but these are not exactly modest demands.

I have heard a lot of TV talking heads casually assume that this strike will push up crude oil prices, but that is a faulty direct-line-relationship prediction.  At first, crude prices declined:

“Suppliers are not going to stop producing just because of refinery strikes so as soon as refineries get full there is nowhere else for it to go so it’s like a dam,” Michael Hewson, senior market analyst at London-based CMC Markets Plc, said by phone. “Pressure remains on the downside for prices but that’s not to say we might not have a temporary stabilization this week.”

But today, oil prices have rallied.

Crude oil prices rose on Monday as investors shrugged off a U.S. refinery strike and focused on a falling U.S. rig count that signaled lower production down the line.

"There were a lot of people on the sidelines waiting for an opportunity to buy," said Bjarne Schieldrop, chief commodity analyst at SEB.

"Brent has struggled sideways for a long time but it closed above the 20-day moving average on Friday for the first time since July, and the rig count is falling sharply. So now they think, maybe this is the time to buy."

The remaining refineries operating are set to make big profits, as the supply of refined product will decline.  This means that prices at the gas pump will climb.  And this will start to impact the economy quickly, and President Obama, who has enjoyed a rally in his approval rating as Americans enjoy more money in their pockets, will start to feel some heat.

So long as the strike affects only ten percent of the supply, the remaining refiners will laugh all the way to the bank.  But if the union expands to the strike industry-wide, it could cripple the economy.  Imagine not being able to buy gasoline!  Multiply that by all the petroleum-based products that go into not just moving goods, but manufacturing them.

That would compel Obama to invoke Taft-Hartley and call for a mandatory cooling-off period.  This would not endear him to the remaining private-sector unions, which are already not thrilled with his opposition to the Keystone XL Pipeline.

So will President Obama further alienate private-sector unions in order to save the economy?

If you experience technical problems, please write to helpdesk@americanthinker.com