Whiting refinery maintenance, possible refinery worker strike… possible outcome? Record high gas prices!

Bad news tonight for consumers, although I personally believe that some issues will be addresssed and corrected before disaster hits. Without wasting time, let me cover the issues.

First, we have a number of refineries reporting being completely shut down tonight, including a 245,000bpd refinery in Texas and a 108,000bpd refinery in Washington. We also have some issues closer to home here in the Midwest. BP’s massive Whiting, Indiana refinery has unexpectedly shut a unit for maintenance. BP was hopeful that the maintenance would only last a week at most, but keep in mind that the unit needs to be shut-down and restarted which means that the unit’s actual time down will be more than a week. I am hopeful that BP will be accurate and have the unit back online ASAP to avoid higher prices in the Midwest market, but with Midwest prices already high, I am somewhat fearful that Midwest spot prices may rise more than those outside our PADD.

A possible price hike may happen as soon as tomorrow. I don’t have an estimated price range due to these issues listed, but it would be no lower than $1.99 and COULD break $2/gallon.

Also on the radar here at TheGasGame.com is a POSSIBLE STRIKE that could occur at some U.S. refineries as early as Sunday at 12:01am if a contract is not met. The United Steel Workers, a union that represents 30,000 workers at half of U.S. refineries that have a capacity of roughly 17.6 million barrels per day of refining capacity, may strike if a contract is not agreed on by weekend, Reuters reports.

Talks could go "down to the wire" on Saturday says USW spokesperson Lynne Baker. While both sides obviously want a new contract in place, both sides are bracing for strike. Oil companies are putting replacement workers on stand-by. Any strike would likely shut down a large portion of refinery capacity in the U.S. and could lead to a spike in gasoline prices as production dives to record low levels. This is a risky situation and one that has the potential to lead to overnight price spikes if there is no resolution. While I am also hopeful, I realize that the odds of a large refinery shut down are very small.

BP does say they WILL SHUT DOWN four of their five refineries represented by labor unions if there is a strike or lockout. BP said it would shut the plants to continue the good working relationship it has formed with the USW in recovering from a deadly 2005 explosion at its Texas City, Texas, refinery.

If any strike does occur, it would lead a huge blow to Midwest consumers, already paying more than the national average and dealing with higher unemployment than any other area in the country. I estimate that if a strike does occur and half of U.S. refineries elect to shut down, gasoline prices could spike almost overnight to $3 or $4.

In good news for Midwest consumers, PADD two contains the most crude oil since 1998- but we still need refineries to refine it so prices drop locally!

Like I said, any strike and shutdown is quite unlikely, but that doesn’t mean we should ignore a possible outcome or not plan ahead. Keep this in mind this week, and check back here at TheGasGame.com for further updates.

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  1. What is the union leadership thinking? Record levels of unemployment + strike = people climbing over the baracades to get to these jobs. It will be worse than a Wal-mart the day after Thanksgiving. I am sure there would be some time involved in ramping up production with a new work force but there is no good outcome in this for the union members.

    This will hurt the national economy in countless ways due to the greed of a few at the top of the union hierarchy, meanwhile the refinery companies will enjoy a largly increased profit margin due to another artificial shortage in the marketplace.

    I am sure we can count on our new leadership in Washington to step in and do the right thing for the country. Perhaps now would be the time to ban the secret ballot for the to unionization voters. (said with tounge firmly planted in cheek.)

  2. Pardon me Tim, but keep in mind that those refineries were built off the backs of union labor and maintained by union workers for decades. Now companies like BP have posted record high profits, soaking the American public for billions (not to mention the nice tax breaks afforded them by Bush and Company). The upper management have made very nice wage increases in the form of bonuses, salary increases, and profit sharing. Isn’t it fair that the workers whose sweat made this possible should enjoy a little raise also???

    Now if BP would like to pay back the public and take away the nice bonuses for upper management and then ask its workforce to not ask for a reasonable wage increase, then I would go along with you. But to say that everybody in the company should enjoy nice bonuses except the workers is just wrong; regardless of whether they belong to a labor union or not. Why don’t you protest raises for the management also?

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