Today’s Labor Updates:
Europe: The New Frontier for Refiners
777X vote shows bitter rift in Machinists leadership
U.K. to Investigate Labor Union Picketing Tactics, Maude Says
Canada: TWU-Steelworkers Merger Falls Short of 66 2/3% Approval Threshold

Europe: The New Frontier for Refiners
by Rupert Hargreaves, The Motley Fool
Updated Nov 17th 2013 9:32AM

The United States’ newfound dominance in the global oil and gas industry is a dream come true for Gulf Coast refiners. Thanks to laws passed during the wake of the 1973 OPEC oil embargo, oil companies cannot export crude produced within the United States. However, refined products can be exported.

What this means is that refiners with a presence on the Gulf Coast like Valero Energy (NYSE: VLO), Marathon Petroleum , and Phillips 66 (NYSE: PSX), which has one refinery on the East Coast and three on the Gulf Coast, are able to export refined product to Europe for much wider profit margins than they would be able to achieve within the somewhat oversupplied domestic fuel market.

Rising demand
It’s easy to see why these companies are concentrating on exports rather than supply of the domestic market. Diesel is expected to become the world’s preferred fuel over gasoline by 2020. However, this growth is expected to come from the rest of the world, while gasoline consumption within the United States is expected to remain static, according to ExxonMobil.

Unfortunately, although demand for diesel is expected to grow within Europe during the next decade, most European refineries are only configured for the production of gasoline and are finding it hard to meet the rising demand for diesel.

What’s more, looking at the numbers coming from the Gulf Coast, any refiners that are not taking advantage of the price differential between the two fuels are losing out. Indeed, as of mid-year profit margins on U.S. Gulf Coast diesel were just above $16 per barrel. In comparison, margins on gasoline were just under $8 per barrel.

So, we can see why refiners are ramping up export volume.

Taking action
It is no surprise that Valero Energy’s management actually described the crack spreads within the U.S. domestic market for the fiscal third quarter as ‘crummy.’ This is why the company plans to expand its export capacity to 400,000 barrels per day over the next few years, up from 193,000 barrels a day of diesel and 91,000 of gasoline exported during the third quarter. Management expects higher export volumes still in the fourth quarter.

Looking elsewhere
Elsewhere, Phillips 66, the world’s largest refiner, has recently decided to pull out of Europe, instead focusing on midstream and chemical operations. That said, the company is still driving export volume.

Surprisingly, Phillips 66 only has export capacity for 340,000 barrels per day, similar to that of Valero. The company does plan to ramp this up to 500,000 during the next several years and has increased the volume of fuel exported for four consecutive quarters. However, as I mentioned above, Phillips’ management revealed on the third quarter conference call that ramping up export volume was not their top priority, and that spending on refining projects was actually pretty low down on their list. On the call, executive vice president Timothy G. Taylor stated:

We’ll fund the advantage crude, we are going to fund the infrastructure around exports and refining, but frankly we just have better opportunities in our higher value businesses around Midstream and Chemicals and we take refining free cash and sell it to those higher value businesses. I think you will see us be very consistent around that.

A competitive advantage
Meanwhile, Marathon’s exports reached a record of 245,000 barrels per day during the third quarter, up from only 124,000 during the same period last year. In addition, Marathon’s management explained that refiners within the United States have the ability to produce the low-sulfur refined products increasingly being required around the world. In theory, this should further underscore export volumes in the future. This demand, along with cheap WTI and Brent crude coming from domestic markets and Canada should give U.S. refiners a strong competitive edge for a long time to come.

Foolish summary
Overall, the ban on crude exports is a boon for U.S. refineries. Gulf Coast refiners are taking advantage of higher profit margins overseas, ramping up export capacity to drive profits. This trend is actually being helped by the fact that European refineries are struggling to produce their own diesel.

Additionally, the ability for U.S. refineries to be able to produce low sulfur refined product is increasing the marketability of Gulf Coast refined product. All in all, exports, not just to Europe but around the world, are going to be a very important income stream for refiners in the future.

The article Europe: The New Frontier for Refiners originally appeared on Fool.com.

777X vote shows bitter rift in Machinists leadership
Originally published November 16, 2013 at 8:09 PM | Page modified November 17, 2013 at 7:38 PM
By Dominic Gates
Seattle Times aerospace reporter
Ellen M. Banner / The Seattle Times

Boeing’s Machinists union went into Wednesday’s crucial 777X decision deeply divided on whether the company’s contract proposal even deserved a vote. The union’s national leaders pushed the vote through despite an emotional confrontation with local staff and officials just days earlier, according to people who were present. Read full article here.

U.K. to Investigate Labor Union Picketing Tactics, Maude Says
By Thomas Penny – Nov 16, 2013 6:00 PM CT

The U.K. will examine intimidatory tactics by Labor unions with a view to overhauling Britain’s employment laws, Cabinet Office Minister Francis Maude said.

Activities such as picketing executives homes and harassing their families risk deterring investment in Britain, Maude said in an e-mail. A succession of disputes at Ineos Group Holdings SA’s Grangemouth oil refinery in Scotland have also increased concern in government about the security of Britain’s infrastructure, he said.

“Allegations about trade union industrial intimidation tactics, including attempts to sabotage businesses’ supply chains and harass employers’ families are deeply concerning,” Maude said. “We need an independent review to get to the bottom of these activities, as well as to look at the role played by government, employers and employees in industrial disputes.”

Prime Minister David Cameron’s Conservative Party have been seeking to highlight the opposition Labour Party’s links to labor unions as they seek to portray it as anti-business and dominated by unelected union leaders.

The Unite trade union, which is one of Labour’s largest donors, and was involved in the Grangemouth dispute, has developed a tactic of “Leverage,” in which it targets customers, investors and other contacts of businesses that it deems to be behaving “immorally.”

Unite’s Leverage
“Leverage is a process whereby the Union commits resources and time to making all interested parties aware of the treatment received by Unite members at the hands of an employer,” Unite said on its website. “Those interested parties may include shareholders of the employer; competitors of the employer; communities within which the employer operates; customers of the employer and the market place of the employer.”

Cameron’s office said employment lawyer Bruce Carr will chair the government’s review and he been asked to appoint a panel including representatives of employers and unions. Carr will have a free choice of who he wants to join him on the panel and is expected to report within six months, the office said.

Ineos Group said on Oct. 15 it was shutting the Grangemouth oil refinery and petrochemical site located on the Firth of Forth. A deal to restart operations was reached on Oct. 25 after Unite agreed to the company’s demands for a three-year no-strike pledge and changes to pensions.

To contact the reporter on this story: Thomas Penny in London at tpenny@bloomberg.net

Canada: TWU-Steelworkers Merger Falls Short of 66 2/3% Approval Threshold
By Telecommunications Workers Union
Published: Friday, Nov. 15, 2013 – 4:35 pm

BURNABY, BC, Nov. 15, 2013 — /CNW/ – Despite majority membership support for a merger of the Telecommunications Workers Union (TWU) with the United Steelworkers (USW), the merger proposal has fallen short of a two-thirds threshold required under the TWU constitution.

In a nationwide, rank-and-file vote conducted by electronic ballot over the last two weeks, TWU members voted 64.4% in favour of a merger with the USW. Final results were released this afternoon after being validated by an independent auditor.

Despite the majority support by TWU members, the merger will not proceed due to the TWU constitution’s requirements that a merger be endorsed by 66 2/3% of voting members.

“A majority of our members support the proposed merger, but our constitution is clear,” said TWU President Lee Riggs.
“We did our best to ensure a truly democratic process, with unprecedented consultation and engagement of our members at all levels of our union,” Riggs said. “It was a productive, dynamic and worthwhile process that will serve us well as we work together to face the challenges ahead.”

The TWU and USW have shared a strategic alliance since 2010. In August of this year, after months of discussion, the two unions reached a tentative merger agreement, which was followed by two months of consultation with TWU members and a rank-and-file vote held over the last two weeks.

“Our work over the last few months has helped build a stronger union, with a more engaged and committed membership,” Riggs said. “The TWU National Executive Council is committed to moving forward in a positive manner and working in the best interests of our members.”
SOURCE Telecommunications Workers Union