Norway intervenes to avert oil industry closure

This was about to be seriously disruptive:

Norway intervenes to avert oil industry closure

By Mia Shanley and Dmitry Zhdannikov

July 9 (Reuters) — Norway’s government ordered on Monday a last-minute settlement in a dispute between striking oil workers and employers in a move to alleviate market fears over a full closure of its oil industry and a steep cut in Europe’s supplies.

The strike over pensions had kept crude prices on the boil with analysts expecting far quicker action by the government to stop the oil industry from locking out all offshore staff from their workplaces from midnight (2200 GMT) on Monday.

Oil markets breathed a sigh of relief on news of the intervention and crude prices dropped in early Asian trade.

Under Norwegian law, the government can force the striking workers back to duty and has done so in the past to protect the industry on which much of the country’s economy depends.

But it was slow to intervene in the latest dispute, which was in its third week, and did so on Monday only minutes before the start of the lockout, citing potential economic consequences.

“I had to make this decision to protect Norway’s vital interests. It wasn’t an easy choice, but I had to do it,” Labour Minister Hanne Bjurstroem told Reuters after meeting with the trade unions and the Norwegian oil industry association (OLF).

A full closure of output in Norway – the world’s No. 8 oil exporter – would have cut off more than 2 million barrels of oil, natural gas liquids (NGL) and condensate per day.

But the minister said her main concern was the potential cut in gas supplies. Norway is the world’s second-biggest gas exporter by pipeline, with the majority of supplies going to Britain, the Netherlands France and Germany.

“This could have had serious consequences for the trust in Norway as a credible supplier,” she added.

The oil and gas industry makes up about one-fifth of Norway’s $417 billion economy.

Leif Sande, leader of the largest labour union Industri Energi, representing more than half of 7,000 offshore workers, said workers would return to work immediately.

“It’s very sad. The strike is over,” he told journalists.

The dispute has raised eyebrows in Norway, where oil and gas workers are already the world’s best paid, raking in an average $180,000 a year. Offshore workers clock 16 weeks a year but cite tough conditions for their call for early retirement at 62.

The oil industry had refused to budge.

“I am very happy that the minister chose to end a conflict that has cost Norway and the oil companies large sums,” said Gro Braekken, leader of the OLF.

The OLF said the 16-day strike came at a cost of some 3.1 billion Norwegian crowns ($509 million).

The next step is compulsory arbitration to define a new wage agreement.

“With this decision we can see that whenever the oil industry says jump, the government listens,” Hilde Marit Rysst, leader of union SAFE, told Reuters. “We will never leave this issue – it is completely unthinkable to stop fighting for those who are worn out at 62.”

She said unions would push their issues at the next suitable opportunity.

Norway is keen to retain its image as a reliable supplier of energy, but analysts have said the Labour-led coalition government was slow to intervene as it faces general elections in a year, and labour unions are important partners.

On Monday, Labour Minister Bjurstroem said she believed the lockout was not necessary and the oil industry will have to take responsibility.

About 10 percent of the 7,000 offshore workers have been on strike since June 24.

Brent crude dropped more than $1 to below $99 per barrel in early Asian trade on Tuesday on news of the intervention, after surging to above $101 on supply fears in the previous session.

The strike had choked off some 13 percent of Norway’s oil production and 4 percent of its gas output.

State-controlled Statoil, which operates the affected fields, said it would resume production immediately and would be back at full capacity by the end of the week.

The last lockout in the offshore sector occurred in 1986, shutting down production on the Norwegian continental shelf completely, and lasted for three weeks before the government intervened. In 2004, the center-conservative government stepped in to avert a lockout. ($1 = 6.0881 Norwegian crowns)

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19 Responses to Norway intervenes to avert oil industry closure

  1. Tom says:

    Well its not entirely true.

    The average pay of an offshore worker is about 90-100K us dollars.

    180K usd a year is only the oil company employees working a lot of overtime.Lots of overtime.

    The reason for the overtime is because the oil companies dont want to hire more people .So they make people work overtime while complaining that they hav to pay so much salary.
    It is theyre own fault.
    But they have do make alot of money in general.
    They cant complain.But they should hire more people.

    Reply

  2. bob says:

    “expecting far quicker action by the government to stop the oil industry from locking out all offshore staff from their workplaces from midnight (2200 GMT) on Monday”

    This is what “strike” means? The industry was going to stop labor from working, but the gov stepped in to make them work? Gov that also “owns” large portion of said industry?

    We need new words, the old ones have lost meaning.

    Reply

    Monica Smith Reply:

    @bob, Indeed, new words. I’m not sure the old have lost meaning; rather they’ve been drowned in euphemisms.

    Reply

  3. Socialista Democratico says:

    What type of inflation are you referring to? I believe Mosler has specified the type of inflation (demand-pull) that there ISN’T right? I’d be interested in comparing the output gap from the aforementioned time period with that of today.

    The inflation I believe you are complaining about is of the ‘cost-push’ nature (from a large variety of independent variables) which might also be potentiated with the effects/relationship of real deflation and growing demand leakages on/with average wages, respectively.

    Reply

    WARREN MOSLER Reply:

    agreed thanks

    Reply

  4. Alexi says:

    Norway still understands that protecting labor and wages is key to success in a free market economy.

    Americans no longer understand free market pricing basics, it requires competitive labor market resulting in high wages for in demand labor.

    If you have an unlimited labor sink in terms of communist slave wage countries to which to cap all wages and destroy labor markets, you have also destroy free market capitalism.

    Reply

    Ralph Musgrave Reply:

    @Alexi,
    The average Norwegian oil worker gets a million Kroner a year (about $160,000 a year), according to this source:

    http://www.presstv.ir/detail/2012/06/25/247811/norway-oil-workers-strike-pay-pensions/

    And I read somewhere they do 16 days work for month for that. They really are hard done by and down-trodden, I don’t think.

    This seems to be part of a pattern: it seems to be the most privileged sections of society striking for more pay nowadays. In the UK doctors have been on strike recently: they get about four times the national average wage.

    Reply

    Hepion Reply:

    @Ralph Musgrave,

    If you would have been clever you would have spotted strike is not over pay but pension age.

    Everywhere neoliberals are telling us that cannot afford to retire at normal age of 60, but have to work to close to 70 because otherwise our national goverments would go bankrupt!!!?!?!

    Reply

    ESM Reply:

    @Alexi,

    “Norway still understands that protecting labor and wages is key to success in a free market economy.”

    Norway is an anomaly. $1T of oil for 5MM people allows them to have a nanny state which won’t actually implode for several decades.

    “Americans no longer understand free market pricing basics, it requires competitive labor market…”

    Which means getting rid of unions, or at the least, not forcing people to join one.

    Reply

  5. Save America says:

    1961, the 60-61 corvette convertible, kennedy was elected, yuri was the first human in space, barack obama and clooney born this year, a good year

    http://www.thepeoplehistory.com/1961.html

    Average Cost of new house $12,500.00
    Average Income per year $5,315.00
    Cost of a gallon of Gas 27 cents
    Average Cost of a new car $2,850.00
    Bacon for 1LB 67 cents
    Eggs per dozen 30 cents

    A brand new 1961 corvette was about 4K, less than the average income. Today most of my friends that can find work get around 30K, and 1961 corvette today costs around 50K! New corvette 55K! 1961 average income guy could put about 20,000 gallons of gas in his corvette if that is all he bought, today at 4 dollars a gallon and my friends making 30K, about 7500 gallons, 2/3rds less! Are you kidding me, and warren says there is no inflation! ;/

    I have just watched some route 66 videos on youtube and I am very angry now!

    Back in the 60’s 2 average american youth could find jobs all over the USA, and make enough to buy a new corvette convertible, new flashy clothes, gas, good food, and money to spend on the ladies and hotels, and travel all over the place and find adventure everywhere. Even warren left those cold snowy connecticut winters to travel down to Miami and do pool work!

    Today a MULTI-MILLIONAIRE probably couldn’t live this lifestyle, but warren says there is no PROOF of inflation! BWAHAHA! LOL! OK.

    Show me 2 guys working odd jobs (if they can even find work) who can buy a new 50K corvette convertible, pay for tires, gas, oil changes, repairs, pay for hotel rooms (120 a night for average), 20 dollars for an average meal, OMG, are you kidding me? There is no inflation though according to Warren. The USA has fallen. These guys even pulled into many full service gas stations, but I have to check my own oil and fill my own gas today, living standards declining everywhere!

    God at the FOOD on route 66 too! You used to could get good local cooked meals with fresh fruits and meats, now its all mcdonalds cardboard processed fr0zen mystery meat that kills you! Injected with all kinds of hormones and antibiotics and pesticides too! This is progress? Seriously? :(

    Reply

    Monica Smith Reply:

    @Save America, Some people love their cages on wheels and others love their gated communities. Neither is any more productive than a gerbil on a wheel in its cage. But, like the gerbil, we keep them as pets and don’t expect them to change.

    Reply

    Save America Reply:

    @Monica Smith, In the route 666 tv show, they go all over the country mixing it up with the locals, variety is the spice, I love to travel, but its becoming too much of a scheduling nightmare, even if you have the oil. Maybe if I get a drinking problem I can burn enough cells to become as dumb as the gerbil and be content with my little cage, Warren says he loves being a slave to 1 small piece of land for at least 6 months out of the year! LOL! The melting pot of our culture mixes a lot better when people can travel cheaply and easily no? At least that is what rick steves tells me.

    Reply

    Jason Hun Reply:

    @Save America, official Fed Reserve inflation data here:
    Oil/energy prices cause inflation, NOT federal deficits -evidence/facts here: http://rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation/
    &
    http://rodgermmitchell.wordpress.com/2009/09/07/introduction/ &
    http://rodgermmitchell.wordpress.com/2011/07/09/why-bank-lending-leads-to-recessions-a-counter-intuitive-finding

    The main reasons why the middle-class is hurting:
    1) OPEC cartel embargoed & cut production by 15 million barrels since the 1970s, driving up oil prices 400% in the 1970s (it only alleviated when the US switched to burning natural gas instead of oil for electricity)

    2) Population grows by 3% to 5% per year, about 50% growth from 200 million to 300 million in 30 yrs in the US.. this has put great pressure on housing/real estate demand in urban/suburban areas of the US, where housing prices have gone up 400%+

    3) yet middle-class incomes is at median/average of only about $44k per year.

    Most of the wealth (from newly created money net finacial assets) since the 1980s has gone to the wealthiest –ie, capital gains/dividends/interest taxed at only 15% while labor income is taxed at FICA/payroll rate of 15% & federal income tax at an additional 10%-34% ..

    CEO pay is now 500x+ times greater than median/worker pay (other countries like Japan,Europe, etc, CEO pay is only 50x to 100x worker pay) despite the fact that it has no bearing on performance:

    Toyota is the largest & most profitable car company, it’s CEO makes $1 to $2 million per year whereas GM/Chrysler go bankrupt yet their executive get paid $8-21 million per year, even more than BMW & Mercedes executives.

    Reply

    Save America Reply:

    @Jason Hun,
    Death by China! Our political leaders have all been bought off by hickeys MIC.

    http://www.youtube.com/user/deathbychina?feature=results_main

    You know Warren often says to let China do all the work, we are making suckers out of them, and we get all the easy imports. So now China is going into Iran and Africa and other places and build all kinds of oil infrastructure, now it would be a GREAT TRICK if we got them to do all the WORK and building and we got all the oil imports, but I don’t think that is gonna happen, do you?

    Reply

  6. Save America says:

    Certainly Warren, you have preached that the Sauds have so many capped wells, they could just supply whatever norway and statoil took offline? They are the swing producers and price setters right?

    I remember a USA with lots of v8 engines and high torque cars that got my girlfriends excited, now when my kids pull up in their “smart” cars I chuckle and think how things used to be, and how crappy they have become. I just toured a ROUTE 66 museum, america’s MAIN STREET. How does a couple kids take a smart car from chicago to los angeles like days of old? The gas bill, the hotel bill, the food bill, impossible on a kids salary cutting lawns or flipping burgers. The downfall of american living standards continues.

    The route 66 tv show, back when things where good, and Norway and Statoil didn’t control the prices of filling up my convertible corvette – LOL!

    http://www.youtube.com/watch?v=R_ykDw-06H8

    Reply

    Save America Reply:

    @Save America,
    About 2 minutes in, Schwarzanegger and Norris make fun of thier “smart” car – he says his shoe is bigger than that car! Now you are telling me a few norway viking dudes who make FREAKING 180K a year have the POWER to squeeze my TEAM USA V8 HIGH TORQUE gonads? (sigh) I thought thor and loki where just movie fantasy.

    http://www.youtube.com/watch?v=mZJn5RC-n2g

    Reply

  7. GLH says:

    Warren Mosler:
    I am interested in your opinion about the economy. If I correctly read Bill Mitchell and Mike Norman, two people I respect, I understand that Prof. Mitchell suspects we are slumping back into a recession whereas Mr. Norman seems to think that we will will avoid a recession although barely. You pointed out before that with an eight percent budget deficit you thought we would have slow growth. Is your opinion still positive?

    Reply

    WARREN MOSLER Reply:

    Seems to me the US is still tracking at positive GDP. I agreed with Bill and Mike that growth would slow, as federal spending ‘winds down’ from one time ‘stimulus’ initiatives.
    And while it looks to me today like gdp will remain positive, particularly if oil prices stay around these levels, if gdp does somehow go negative for two quarters (the definition of a recession) I don’t see a ‘collapse’ coming with the deficit where it is.

    And the modestly improving housing market is being supported by modestly growing consumer debt which is ‘making up’ for falling federal deficit spending.

    Reply

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