20080428 oil refinery strike scotland 18
Workers walk to a union rally on Sunday at the Grangemouth oil refinery in Scotland as they strike over a pension dispute. Production ceased at the plant on Friday. - 


KAI RYSSDAL: The proximate cause of aviation merger fever continues unabated. Oil nudged ever closer to $120 a barrel -- $119.93 was the top. Two theoretically unrelated labor disputes were largely to blame. From the European desk in London, Marketplace's Stephen Beard reports.

STEPHEN BEARD: Workers at an oil refinery in Scotland are on a two-day strike. The dispute is over pension rights and is completely local. But it sent ripples around the globe. The refinery supplies power to one of the main pipelines pumping oil in from the North Sea. The pipeline was shut down, preventing the delivery of 700,000 barrels of crude a day.

Commodities analyst Nicholas Brooks:

NICHOLAS BROOKS: In normal times the impact wouldn't be so huge. But in an environment like you have today where there is very, very tight supply the impact can be quite large in the very short term and we've certainly seen that today in the markets.

To make matters worse, workers striking over pay knocked out Exxon's facilities in Nigeria. Together the two disputes cut global supplies by 2 percent. That's especially worrying, says oil analyst Phillip Verlegger, because this is the high-quality crude needed to make the cleaner fuels that are mandatory in the U.S. and Europe:

PHILLIP VERLEGGER: The light, sweet crudes such as produced in Nigeria or come out of the North Sea are very desirable because it's much easier to remove the sulphur.

The Scottish refinery workers are threatening further action, and there's no end in sight for the Nigerian dispute. Some analysts are warning the worst oil supply disruption in recent years is set to continue, putting even further upward pressure on the price.

In London this is Stephen Beard for Marketplace.