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Refinery Workers Set To Go On Strike

With a third contract offer rejected, some 24,000 refinery workers from the Gulf of Mexico to Montana prepared to head to the picket lines Saturday just hours before an existing labor agreement expires.

The nation's biggest refiner, Valero Energy Corp., said it would shut down some facilities if workers strike. So did European oil company BP PLC.

Shell Oil Co., the lead negotiator for the industry, along with Exxon Mobil Corp., said its refineries would continue to make gasoline, diesel and other fuels using nonunion or replacement workers.

Chemical refiners would also be affected. LyondellBassell Industries said it was bringing in managers from locations not involved in contract negotiations to keep refineries going.

A strike would affect 60 producers, according to Lynne Baker, a spokeswoman for the United Steelworkers, which represents more than 30,000 oil workers nationwide.

Bobby Hollis, chairman of the negotiating committee for the Steelworkers at Valero, said it was doubtful that there would be an agreement by the midnight deadline.

Negotiations continued into Saturday evening and union officials said some progress was being made, but would not talk about sticking points.

Thursday, union negotiators turned down the most recent offer of a 2.5 percent wage increase for each of the next three years, in addition to changes in medical coverage.

The impasse comes with refiners already cutting back production and industry experts are divided over whether a strike would hit the pocketbooks of motorists.

Job numbers are in free fall, which has led to unprecedented declines in miles driven by Americans.

Motorists cut their driving by 12.9 billion miles in November, down 5.3 percent from the same month a year earlier, the largest such decline of any November since monthly data estimates began in 1971, the Federal Highway Administration said this month.

On the surface, that suggests retail gasoline prices should be falling, but refiners are reading the same headlines and have aggressively cut back production.

Refiner cutbacks and the threat of a strike pushed gasoline futures up throughout the week on the New York Mercantile Exchange.

Friday, gasoline futures rose nearly 4 cents to $1.27 per gallon. When gasoline futures rise, retail prices tend to follow. The national average for a gallon of gasoline hit $1.846 on Friday. While that's still $1.14 less than last year at this time, gas is getting closer to $2 a gallon just a month after bottoming out at $1.61.

With refiners turning away oil shipments, crude storage levels have risen by about 20 million barrels in the past month, according to the U.S. Department of Energy.

Antoine Halff, an analyst with Newedge Group, said workers may actually be doing the industry a favor by going on strike with demand for gasoline so low.

Many of the refineries are on the Gulf Coast, near Houston and New Orleans. There are about 4,000 refinery workers in Houston alone. But the strike would reach into California, Montana, and Tennessee, which also have refineries with labor contracts expiring.

Valero told employees Friday that it would close its facilities in Delaware City, Del., and Memphis, Tenn., if there is a strike.

The company said it would keep its Port Arthur, Texas, plant open with a contingency work force that is being trained.

"We would rather reach an agreement without a work stoppage at all," said spokesman Bill Day.

Exxon Mobil said negotiations were ongoing, but that plants would remain operational until a collective bargaining agreement was reached.

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