Editor’s Note: This is the second in a series on how retooled refineries can save jobs and revitalize manufacturing. See Chris Freind’s “We Can Save Philadelphia’s Sunoco Refinery Jobs,” here.
“You are right … finding middle-class wages here in Pennsylvania is challenging if not impossible. The blood, sweat and tears of years planning and building our dream home only to sell it in a bad housing market is like adding salt to the wound.”
This heartbreaking message was sent by a distraught wife of a 19-year Sunoco refinery worker, as that company’s two refineries (Philadelphia and Marcus Hook) are slated for closing, as is the ConocoPhillips refinery in Trainer, Delaware County, if no buyers are found. Making the sin mortal, there are reports that the ConocoPhillips plant might be dismantled, shipped overseas, and resurrected in a foreign—potentially adversarial—country. But this is nothing new, as America’s abandonment of its manufacturing base has often included shipping entire facilities overseas for the benefit of our competitors.
Can it be reversed? Is it possible not only to save these refinery jobs but at the same time create a rebirth of American manufacturing—mandatory for the nation’s future since no country has ever survived without an industrial base? Many “experts” will arrogantly claim “no”—that America can’t compete with Chinese labor costs, and smugly proclaim that manufacturing is passé anyway, unnecessary in a modern, 21st-century economy.
Unfortunately, the wrong people are losing their jobs. The backbone of America shouldn’t be facing the unemployment lines. The so-called experts, including the politicians from both parties who got us into this mess, should be the ones getting canned.
But if we are to save jobs by retooling the refineries to process God’s gift to Pennsylvania (and the nation)—Marcellus Shale natural gas—it is imperative to stop the blame game. Likewise, the fly-by-night ideas proposed by some shortsighted politicians must be seen for what they are: either clueless suggestions or a naked pandering for votes.
Sunoco Didn’t Cause the Problem
A million dollars is a lot of money. Who hasn’t thought about having that much cash? You could do a lot with a mil per year, even more if you made that per week, and would be king of the world if you raked in seven figures per day, especially if that was the case for three straight years. Life would be sweet—unless, of course, you happened to be in the sweet crude oil refining business in a deteriorating market.
So if making a million a day is desirable, losing that amount on a daily basis would be, in professional financial nomenclature, very, very bad. Common sense tells us that anyone losing a million a day for three years would do everything possible to stop the hemorrhaging. Welcome to Sunoco’s plight.
Ask any student unschooled in economics what the primary objective of business is, and he will invariably answer, “to make money.” Wrong. Making money is easy. Earning a profit by taking in more than you spend—the correct answer—is the hard part.
Despite the misguided “Occupy” mentality that profits are nothing more than gluttonous greed, the truth is quite different. They are necessary to expand operations, hire more personnel, pay salaries and benefits, and contribute to the overall health of a company—and the entire economy. (Not that Wall Street greed doesn’t exist in numerous other forms, much of which should be regulated/outlawed, but that is another column.)
Sunoco and ConocoPhillips are not in the “business” of losing money, and their past profits and payouts to shareholders are completely irrelevant to the fact that the outlook for the refining business is bleak. They are under no moral, ethical or financial obligation to keep the doors open. Keeping people employed inefficiently—read subsidized—in a business with no possibility of profit is anathema to the free market and would eventually collapse the entire entity. This is not speculation but economic certainty.
And if you want to see what happens when this course is recklessly pursued, pull up a chair because you’re in luck. You have a ringside seat watching such an implosion in action: the unsustainable economic policies of the United States government.
It is also important to note that in 2009, Sunoco announced a significant worker layoff in an attempt to improve company competitiveness—and all were white-collar jobs, with no unionized personnel getting pink slips. Closing the refineries is anything but anti-labor.
Unions Didn’t Cause the Problem
The refinery shutdowns have nothing to do with “greedy unions sucking too much money” from the companies’ bottom lines, as some critics of organized labor incorrectly state. Many of those in refinery operations are highly skilled union workers who have made a solid living over the last several decades. But a look at the market conditions shows such a minefield ahead for the companies that no amount of concessions would come close to solving the problem. In the big picture, the significant obstacles facing Sunoco and ConocoPhillips are infinitely greater than any “high” labor costs associated with operating the refineries.
Just like “evil empire,” rich oil executives make inviting targets for blame, so do “pillaging” unions who “want more for doing less.” Is either side perfect? Of course not, since there is no such thing. But while both make good scapegoats, it is simply counterproductive to continually throw darts at them. Insults don’t solve problems. Strategic vision and genuine partnerships do. The only thing that matters is solving the problem—and quickly.
Obama Didn’t Cause the Problem
Some find it convenient to blame the President for everything from high gas prices to their children getting a bad test grade. While he certainly has his faults, he extended his hand to the Republicans on the single most important issue of our time—moving America toward energy independence. If some of his suggestions had been enacted (which, in reality, are part of the Republican platform), they would have quite possibly made the refining outlook much brighter for Sunoco and Conoco, and the shutdowns may not have occurred.
And the GOP response? No bills were introduced, and they absolutely refused to work with the President, with many stating that “he didn’t really believe what he was saying.” What a brilliant, mature response.
For the disbelievers who need proof, just watch the President’s 2010 State of the Union speech, when, in front of the entire nation, he urged Congress to expand our offshore drilling ventures, and free up millions of acres of coastal water for exploration and development. In addition, he called for an increase in nuclear power plants across America and pursued loan guarantees for new facilities (even one year later in light of the Japanese disaster).
Which was interesting, not only because he went against one of his strongest constituencies (the environmental lobby), but also because Obama’s move threw a wrench in the conspiracy that he was a closet Muslim who wanted to weaken America. Pushing for energy independence would be the polar opposite way to achieve that goal.
Granted, Obama has not been stellar in following up on his domestic drilling initiatives after the BP spill, and has yet to authorize the critical Keystone XL Pipeline project, but those shortcomings pale in comparison to the GOP’s inaction.
What did oilman George W. Bush or his Halliburton-affiliated sidekick Dick Cheney do to increase domestic production? Zero.
Or the patriarch of the Bush family, George Herbert Walker Bush? Well, it was the elder Bush who signed the moratorium on offshore drilling. His son W. left it in place for seven years, despite having sizable majorities in both Houses of Congress. Only after fuel costs skyrocketed to more than $4.50 per gallon in 2008 did he call for the lifting of the moratorium. But it was too little, too late. And it never happened.
What could have prevented those crippling spikes at the pump: offshore drilling—both off the continental shelves and in the Arctic National Wildlife Refuge—and the construction of new refineries, given that the last one was built in 1976.
And what better time to have pushed it through than right after the 9/11 attacks. In addition to having a Republican Congress and nearly 100 percent of the nation behind him, Bush had the world’s goodwill in his corner.
Instead, this nation’s reliance on foreign oil—which is a nice way of saying we are pumping billions of petro dollars into the coffers of some who are hell-bent on destroying us—has only increased.
And this week, gas hit another all-time high for this time of year.
Both parties are guilty of forsaking America’s security and economic well-being. It is only right that they atone by eliminating the red tape, bureaucracy and onerous regulations placed upon the energy industry, as well as rescind the economy-killing taxes on fuel. Those steps would make it infinitely more palatable for entrepreneurs to convert the refineries, keeping those strategic assets and jobs exactly where they belong: in America.
Parts three and four will detail solutions for how refinery conversions can jumpstart the economy through specific uses of dry and wet natural gas—while not making Philadelphia a port for Liquefied Natural Gas.