Steelworkers Ramp Up Oil Industry Bargaining; Prepare for a Strike

With gasoline prices falling by at least 40 percent since June, consumers are feeling fairly chipper lately. So is the United Steelworkers. For months, the Pittsburgh-based union, with 860,000 active members, has been preparing for oil industry contract talks in January in light of the rapid rise of cost-efficient drilling technologies, especially “fracking.” An worldwide oil glut, and accompanying price decline, has prompted the union to demand a larger piece of the action. Members earlier this month voted on whether to ratify proposals developed at the USW National Oil Bargaining conference in late October, though no word is yet available as to the outcome. Vice President Tom Conway notes: “The oil industry continues to earn billions of dollars in profits and can well afford these proposals.” The current contract expires January 31. In preparing for the worst, the union has created a supplemental strike fund.

The United Steelworkers, despite what its name suggests, represents many workers outside the steel industry. Among them are about 30,000 employees at 160 production, refining, marketing, transportation, pipeline and petrochemical facilities across the U.S. Union-affiliated refineries, in fact, account for nearly two-thirds of the nation’s refining capacity. These companies include Chevron, ExxonMobil, Marathon and Tesoro. A growing portion are involved in emerging exploration technologies, such as horizontal drilling and hydraulic fracturing (“fracking”), which involve blasting impermeable shale rock to extract otherwise inaccessible oil. Another is Enhanced Oil Recovery, which enables drilling to reach otherwise unreachable residual oil within an active well. This “tight oil” technology, which in short order has come to account for around half of all domestic crude oil production, has enormous potential for further growth, lessening our dependency on foreign sources. Harold Hamm, chairman and CEO of the Oklahoma City-based Continental Resources, predicts that output from the North Dakota portion of the Bakken oil formation will double in the near future to 2 million barrels daily. U.S. crude oil production in 2013 was 2.716 billion barrels, or about 7.5 million barrels a day. That came to a little less than 10 percent of total world production.

If there is one thing, more than anything else, that has helped keep oil prices down in the face of surging worldwide demand, it is cost-cutting extraction technology. Accentuating this tendency in recent weeks was the announcement on November 27 by the Organization of the Petroleum Exporting Countries (OPEC) cartel, following several hours of negotiations in Vienna, that it would not reduce production. Crude oil prices, already down 30 percent from June at the time of the meeting, have continued to plummet. From roughly $100 a barrel, prices are hovering around $60 a barrel, if not lower. Motorists are seeing the results at the gas pump. The retail price of gasoline nationwide is now around $2.40 a gallon; in the Midwest and Gulf Coast regions, it is down to about $2.20 a gallon. Increased profitability also means greater opportunities to negotiate wage and benefit increases for petroleum industry workers. That’s why the United Steelworkers is giving this issue urgent attention.

Back in late October, some 300 delegates at the USW National Oil Bargaining Conference in Pittsburgh developed, and unanimously approved, a collective bargaining issues program in preparation for contract talks with industry representatives in January. Union International Vice President Gary Beevers, who heads the program, wants to pull out the stops if that’s what it takes to get a greater share of the profits. “I’m expecting the most difficult negotiations that I’ve seen in the three terms as vice president of the oil sector,” he remarked. “We have an industry that has very, very good profits telling us we don’t deserve a good piece of the pie, and we disagree.” That piece of the pie involves sizable wage increases, stronger rules to prevent on-the-job fatigue, and greater assurances that union members will receive first priority in hiring. As a show of force, delegates also unanimously passed a resolution to form a committee to assemble a special strike fund to support local affiliates. This fund would amplify the already large international union strike fund and would represent the first time in two decades that the USW will have appropriated funds for this purpose.

Following passage by delegates, the union put the policy document to a vote before all bargaining units. If at least 75 percent of the units ratify – and the process was scheduled for completion by December 15 – it becomes official union policy for contract talks beginning on January 15. Union members overwhelmingly had ratified similar proposals in 2008 and 2011. Beevers puts it this way: “I look forward to negotiating a contract that is fair to our oil workers and the industry. But if talks don’t go well, our members are mobilized and ready.” Royal Dutch Shell, which will represent the industry position, is “optimistic” that a mutually satisfactory agreement can be reached. But union rhetoric suggests a strike is just around the corner. Under the heading, “Getting Ready to Do Whatever It Takes to Win Fair Contracts in the Oil Industry,” the Steelworkers website announced that more than 300 union members have been participating in ‘Strike Preparation’ workshops at 17 different locations around the U.S. Over the next several weeks, local unions will distribute literature at refineries to “educate newer members on the bargaining process, wear stickers and hang placards in their car windows, and organize plant gate rallies and other mobilizations at many sites.” A nationwide strike, estimates Bloomberg News, could halt as much as 63 percent of domestic fuel production.

This raises the question: How well are oil workers paid? As it turns out, the answer is pretty well. According to “Occupational Outlook Handbook,” a publication of the U.S. Bureau of Labor Statistics (BLS), median 2012 pay for petroleum engineers in this country was an impressive $130,280 per year, a sum that translates to $62.64 per hour. Typically, a bachelor’s degree in engineering is required for getting hired; work experience in cooperative programs enable students to earn academic credit. Recent data from a private-sector survey, PayScale Human Capital, yields similar results. A petroleum engineer currently makes a median annual salary of $118,504; a reservoir engineer, project engineer and petroleum geologist, respectively, make $145,000, $75,000 and $122,000. Employment in this area is poised for strong growth. The BLS projects the number of petroleum engineers, for example, to increase by 9,800 during 2012-22. That comes to a 26 percent hike, “much faster” than the national composite.

The United Steelworkers should do well at the bargaining table next month. The last time around, in January 2012, the union and Shell reached an industry pattern bargaining agreement, which served as the basis for individual refinery contracts. The pact specified pay increases of 2.5 percent in the first year and 3 percent in the second and third years, along with safety improvements. Yes, oil industry profits are up. The desire on the part of USW leaders to get a larger piece is understandable. At the same time, this trend is very much the result of research and development in cost-efficient exploration and recovery technologies. As profitability is crucial to the achieving eventual full energy independence, a strike, which union leaders appear to welcome, would not be a good way to promote it.