The strikes at French refineries over the last two weeks were likely the first stage of a protracted battle between the country’s largest refiner, Total, and its employees that will take shape in 2014.
At stake is the future of oil refining in France, Western Europe’s second largest oil consumer, following the pledge made by Total’s CEO Christophe de Margerie to keep all the group’s French refineries open until at least the beginning of 2015.
The promise was made when Total stopped refining activities at Dunkirk in February 2010. That may have seemed at the time like a distant goal, but Total now must decide next year whether to keep operating all five of its sites in France.
After a relatively good year in 2012 helped by the closures of many refineries (one of which, Petit Couronne, was situated in France), profit margins at European refiners have fallen steeply in 2013.
They were depressed by continuing high crude prices in Europe relative to the rest of the world and a wave of refined product exports from the US, Russia and to a lesser extent the Middle East and Asia. This past year followed more than five years of generally poor margins in the sector due to overcapacity. The French refining sector is said to have lost a combined $500 million in 2013.
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By launching strikes at five sites across France in mid-December, Total’s refinery employees hoped to negotiate higher wages but were also likely warning their employer about further troubles, should Total decide to close one more refinery at the start of 2015.
But, for now, Total has undoubtedly gained the upper hand. As workers at the UK’s Grangemouth refinery found last October, employees find it hard to drive a bargain in an unprofitable industry.
European refined product markets, particularly diesel, have been amply supplied over the last few months and Total’s traders easily found replacement volumes during the strike, albeit at slightly higher prices than before. Meanwhile, France’s ports, pipelines and oil depots were operating normally, unlike during a previous strike in 2010, ensuring steady supplies.
I was in the region around Nantes, in Western France, during Christmas, and found slightly longer queues at petrol stations. But they were prompted by drivers’ rational urge to keep their tanks as full as possible in case of further troubles, rather than a lack of products.
The Gonfreville and Donges refineries on the Atlantic coast, France’s two biggest refineries, have recently been modernized and will stay open. The Grandpuits, Feyzin and La Mede plants, which are smaller and produce a higher proportion of gasoline (a less valuable product than diesel) are clearly more at risk. They have operated at lower production rates during long periods of time in 2013.
After Total quickly agreed to a pay deal with two unions, the decision by the CGT to continue striking at four plants quickly unraveled. In the end, Total did not budge and all five of its French refineries have now returned to production, putting an end to the movement, at least for now.