With gasoline prices falling by at least 40 percent since June, consumers are feeling fairly chipper lately. For a different reason, so is the United Steelworkers. The Pittsburgh-based union, with 860,000 active members, is preparing for oil industry contract talks next month in light. And one of the topics sure to come up is the rise of cost-saving drilling technologies and the desire by the USW to share in some of the profit. Members earlier this month voted on whether to ratify proposals developed at the USW National Oil Bargaining conference in late October, though no word has been 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 an apparently ominous note, the union has created a supplemental strike fund.
The United Steelworkers, despite its name, represents a great many workers outside the steel industry. Among them are about 30,000 employees at 160 oil production, refining, marketing, transportation, pipeline and petrochemical facilities across the U.S. Union-affiliated refineries account for nearly two-thirds of America’s refining capacity at companies such as Chevron, ExxonMobil, Marathon and Tesoro. All in some way are involved in emerging exploration technologies, such as horizontal drilling and hydraulic fracturing (“fracking”), in which oil workers blast impermeable shale rock to extract otherwise inaccessible oil. Another is Enhanced Oil Recovery, which reaches large volumes of residual oil within an active well. This “tight oil” technology, which in relatively short order has come to account for around half of all domestic crude oil production, has enormous potential for further growth, in the process 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, where the company has engaged in extensive fracking, soon will double 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’s a little less than 10 percent of total world production.
If there is one thing, more than anything else, that has kept oil prices down in the face of surging worldwide demand, it is emerging extraction technology. Driving this tendency further 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 cut production. Crude oil prices, already down 30 percent from June, subsequently have continued to plummet. From roughly $100 a barrel, prices are hovering around $60 a barrel. Motorists are seeing the results at the gas pump. The average retail price of gasoline is now around $2.40 a gallon; in the Midwest and Gulf Coast regions, the figure is about $2.20 a gallon. Yet in spite of the price declines, profits are high. This means more opportunities to negotiate wage and benefit increases for petroleum industry workers. The United Steelworkers, for one, 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. Union International Vice President Gary Beevers, who heads the program, is willing to pull out the stops 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.” What the USW wants is accelerated wage increases, better safeguards against worker fatigue, and more 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 new 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. By contrast, 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 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.
But how well are oil workers paid? Actually, the answer, at least for skilled workers, is pretty well. According to “Occupational Outlook Handbook,” a publication of the U.S. Bureau of Labor Statistics (BLS), median pay in 2012 for petroleum engineers was $130,280 per year, or $62.64 per hour. Recent data from a private survey, PayScale Human Capital, reveals similar results. Petroleum engineers currently make a median salary of $118,504. Reservoir engineers, project engineers and petroleum geologists, respectively, make $145,000, $75,000 and $122,000. And this is a growth area. The BLS projects the number of petroleum engineers alone to increase by 9,800 during 2012-22. That represents a 26 percent hike, which in the BLS’ words, is “much faster” than the nation as a whole. Even entry-level jobs pay well. Welders and radio operators, for example, each start out at $62,000. Safety, of course, is a paramount issue, especially in the wake of the 2010 BP disaster in the Gulf of Mexico. But they will occur whatever the compensation.
If the recent past is any indication, the United Steelworkers should do well at the bargaining table. The last time around, in January 2012, the union and Shell reached an industry pattern bargaining agreement specifying pay increases of 2.5 percent in the first year and 3 percent in each of the second and third year. The industry also agreed to institute safety improvements, an obvious point of contention given that this was the aftermath of the BP Gulf disaster of 2010. The desire on the part of USW leaders to win wage concessions in the face of growing industry profitability is understandable. At the same time, this trend is very much the result of research and development in exploration and recovery technologies. As profitability is crucial to our country achieving full energy independence, a strike would be a bad way to promote it.