Strike at BP might fuel regional gas price spike
1/30/2009BP PLC's decision to shut four U.S. refineries if the United Steelworkers decide to strike over contract negotiations may raise regional fuel prices, benefiting competitors such as Exxon Mobil Corp. and Citgo Petroleum Corp.
"If BP announces that this weekend, the market would surge 10 to 15 cents higher," said Dominick Chirichella, a senior partner at the Energy Management Institute in New York. "If they do shut them down, you will get an overreaction to it. Refined product prices would rise, and crude prices would fall."
Refiners and the union are negotiating a labor contract this week affecting about 30,000 employees, or 58 percent of U.S. oil workers. If a strike is called, BP said it will shut plants in suburban Toledo; Whiting, Ind.; Texas City, Texas, and Carson, Calif.
The contract expires at 12:01 a,m. Sunday, and members have authorized a strike. Management's third and latest contract offer will be rejected, Gary Beevers, a Steelworkers vice president, told union members in a memo.
If BP shut its Whiting plant, Chicago-area refining capacity would drop by 50 percent, according to U.S. Energy Department data. The closing might boost processing margins at Citgo's Lemont, Ill., plant and Exxon's Joliet, Ill., facility, Mr. Chirichella said.
BP did not train replacement workers "because we have been working closely with our unions to improve the safety and operations at our facilities," said Scott Dean, a BP spokesman.
A shutdown of the plant in the Toledo suburb of Oregon would cut area processing capacity by 36 percent, according to Energy Department data.