Coronavirus And Global Oil Glut Put The Squeeze On Local Oil Workers
The Southern California petroleum industry is struggling right now, hit by a double punch from both producers and consumers. Now the area's 65,000 directly-employed workers are feeling the squeeze.
The first blow came as Russia engaged in a price war with Saudi Arabia and its oil-producing partners, causing high production and low prices. Then came the coronavirus shutdown of the U.S. economy, killing the market for already low-priced gasoline and jet fuel.
"Demand is being destroyed," said Dave Campbell, secretary-treasurer of the United Steelworkers Local 675, which represents workers at five of Southern California's seven refineries. "I've never seen anything like this, and I was around in 1974 when we had the OPEC oil embargo."
Some three dozen tankers are now lined up in the waters off the Long Beach and Los Angeles ports, with no place to offload their cargo of crude oil.
"Tankers are being leased to the tune of $230,000 a day to store either crude oil or finished product," Campbell said.
HOW ARE REFINERIES AFFECTED?
Refineries are operating at minimum levels, re-circulating the same already-refined fuel through their plants to keep the equipment in good working order, while producing little product.
"It's called chasing tail," said Campbell, as in a puppy ineffectually going 'round and 'round. So far, none of the refinery workers he represents have been laid off. But he's warning them to prepare for a long downturn in the local oil industry.
"I don't want to speculate and drive fear into my members, but people should be getting as prepped as they can for this to last for some time," Campbell said.
Meanwhile, about 110 of his union's members who operate oil wells and equipment onshore in the Long Beach area could face layoffs, because there's no demand for the crude oil they're drawing from the ground.
"You can't produce oil, you can't refine oil into gasoline and diesel jet fuel, and you can't sell it because you've got too much stored in your tanks at refineries and no place for it to go," said Catherine Reheis-Boyd, president of the Western States Petroleum Association.
She added that she had never seen such a dire confluence of events affecting the petroleum industry.
HOW ARE GAS STATIONS AFFECTED?
With Angelenos staying home, gasoline sales are way down.
Diesel fuel has also taken a hit in demand — but not as severe, because diesel is still needed to run all the big trucks that are keeping the stores stocked.
Gas stations already operate on fairly narrow profit-margins for gasoline, so any hit has a major impact.
Gas stations with convenience stores, however, have seen an increase in sales of snacks, coffee and other items that have a higher profit-margin, said James Allison of the California Fuels and Convenience Alliance.
Convenience stores are also quicker to get in and out of than grocery stores, and some may be closer to residents, he added.
Those sales just might help mini-markets survive the slump in gas sales.