Maths and realities

Overlying the human aspect of the Grangemouth closure is this indefinable feeling that the news story is being very closely choreographed.

All along, the national news angle has been that the threat to the petrochemical operation and refinery is rooted in union intransigence.

It’s that hoary old news media trajectory, which says that stick-in-the-mud unions prefer to shoot themselves in the foot by refusing to make reasonable concessions. If only they would roll over, goes the story, new investment will pour in and magically turn around the fortunes of the plant.

Yesterday, the BBC’s main online news story on Grangemouth ran to 1,600 words and mentioned unions 16 times. Only right at the end of the story did it mention the fact that the site as a whole is losing £120 million a year.

According to the BBC report, the petrochemical side of the business is losing £50 million a year, or £62,500 per full-time employee. That leaves the refinery losing £70 million a year, or £122,000 per full time employee.

Spread over the entire workforce, which includes around 2,000 contractors, the site’s owner is losing around £750 per week per worker.

Political

You have to ask what kind of concessions would be required from 800 petrochemical workers in order to turn around losses on that scale. And in any case the basis of the union dispute, according to the BBC story, seems to be more political (it’s linked to the Falkirk vote-rigging row) than industrial.

What’s not been mentioned in any of the coverage I’ve seen is the fact that the UK simply has more oil refining capacity than it can use.

Last year’s stories about the US becoming an exporter of refined petroleum products largely failed to mention how the situation arose.

The States used to import large volumes of petrol from the UK. That was until high oil prices drove domestic US consumption down to the point where local refineries could happily meet demand there.

Slump in fuel demand

So the US market has gone. British petrol and diesel demand has slumped too. Developing countries have a fast-growing appetite for road fuels – but as part of their development they’ve built their own refineries and petrochemical plants.

Now Grangemouth’s owner says it needs to invest £300 million (£90,000 per worker) in the petrochemical plant to reconfigure it to profitably handle a dwindling supply of low-ethane crude from the North Sea.

In the oil business of 20 years ago, £300 million would have been a sprat to catch a mackerel (more like a basking shark). In today’s world, where OECD fuel demand and economic buying power is fast fading in the face of $100 crude, such an investment easily starts to look like good money being thrown after bad.

From a purely business perspective, closing the plant now rather than later has to make mathematical sense under the circumstances.

I realise that that argument ignores the devastating economic and social impact that closure would have on a wide area around the plants. However, that prospect doesn’t explain why the unions, rather than the global economics of unaffordable oil, are being put in the frame for the threat to Grangemouth.

Myth

Scrapping a facility that puts fuel in our cars and plastics for our gadgets goes entirely against the grain of our core modern myth of progress. Oil is the magic nourishment that, when used to feed human ingenuity, delivers a bright new today and an almost impossibly brighter and shinier tomorrow.

Don’t tell us it’s not true! Shutting an oil refinery is tantamount to admitting that God doesn’t love us any more.

We must have sinned. Or rather, since we ourselves still believe deeply in Progress and Man’s Predestined Journey to the Stars, someone else must have sinned.

Hence the immediate, almost unconscious, finger-pointing at the unions. They are every media outlet’s shorthand for Luddite, dog-in-the-manger, anti-progressivism. Why, they are so backward-looking that they don’t want to give up their final salary pensions! (Note that many of the Daily Telegraph readers shaking with fury over this red threat to bonnie Scotland are themselves retired on final salary, index linked pensions).

Taxpayer subsidy

Unless there really is some way of reconfiguring Grangemouth to operate at a profit, any deal to keep it going will probably involve some kind of hidden taxpayer subsidy to the owners. From a social perspective, the benefit to region and country from a subsidy might be greater than the costs of letting the plant close. It would also be a sweet deal for the company and the politicians.

If the plant is ‘saved’ for a few more years of operation, the owners will get public cash to mitigate their losses while the politicians take the credit for keeping it going. If it closes, it will be all the unions’ fault – even though it currently looks as though they will accept the terms of the ‘rescue package’.

Funny isn’t it? The myth of progress is increasingly used to browbeat and scapegoat people into believing that it is their own fault when they have to accept the smelly end of the stick.

And yet the idea persists (especially in media like the BBC) that the future will be wonderful because humans can and will overcome anything reality throws at us, including a self-destructing financial system, insufficient natural resources and a rapidly-destabilising climate.

Well I guess if things don’t work out as promised, we can always find a union to blame it on.

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