Workers for Petrobas, the largest oil company in Brazil, are going on strike. According to Bloomberg, the action may cut Brazilian daily oil output by more than half. In a world where even the rumor of interrupted supply can send crude up by several dollars, the news is certainly not welcome.
The labor issue adds a new wrinkle to the dynamics of oil pricing. Already in the mix are speculation, the value of the American dollar, OPEC decisions on supply, consumption increases in China and India, and political problems in Nigeria and Iran.
Among all of the problems facing oil prices over the long-term, labor could end up being the most severe. Workers see oil companies and their owners getting fabulously rich. Little if any of that is passed on to the day laborer. In countries where personal income is extremely modest, the spread between worker and owner is likely to get larger. Labor understand the economic value of shipping crude every say and the potential harm that an interruption does to a company which counts on the even flow exports of oil for its profits.
Several exporters could run into a problem not unlike the one faced by Brazil. Nigeria, Mexico, Venezuela, and Russia are probably near the top of that list. Some of the countries in the Middle East might be added. Being poor and working for a rich company is the same everywhere.
Labor movements have learned a great deal over the last century. There is nothing like a strike to get management’s attention. In the case of oil companies the repercussions are unusually broad.
Douglas A. McIntyre
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