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It’s not a matter of whether it “needs” to close, it’s a matter of what Shell want to do with it

July 28th, 2011 at 12:58pm

I was somewhat alarmed yesterday when the news about Shell closing a refinery came out, and the union official who spoke about it on the radio was going on about how the union doesn’t believe that the refinery needs to close, and the closure should therefore be stopped. I can understand unions being concerned for their members, but I think that sometimes that need to realise that businesses do not exist to employ people, rather they exist to make a profit and they employ people as a side-effect of that, so forcing a business to be less profitable is not in the interests of the members of unions.

In the case of the refinery which Shell plan to close, it is simply not competitive in the global marketplace now that Asian refineries are producing so much more oil than it is. As a result, Shell plan to change from refining oil at the Clyde refinery to processing imported refined oil at the facility. Some jobs will be lost, but far fewer jobs than would be lost if Shell was forced, as the unions seem to want, to continue to run the refinery at a loss. It should also be noted that Shell has:

repeated earlier comments that it would relocate as many workers as it could to other Shell operations.

(h/t The Australian)

So, Shell wants to keep as many of its already-trained and presumably loyal employees as is practical by using them for other functions within the company, doing things which actually are profitable and could result in even more employment in the future, as tends to happen in healthy, profitable businesses.

You’d never know that if you ask the unions though.

The AMWU claims 500 direct jobs are at stake, while a further 1700 could be lost in downstream industries like petrochemicals and plastics if the historic refinery is shut.

(h/t NineMSN)

Nonsense. Shell will continue to refine oil elsewhere, as will other companies, and Shell will be replacing the no-longer-locally-refined oil with imported oil. Downstream industries will not be forced to sack people due to a lack of refined oil as there won’t be a lack of refined oil. As for Shell’s employees, as already stated, Shell will offer them employment elsewhere within the business, and any employee who does not work elsewhere within the company for whatever reason is free to find employment elsewhere, and you can be sure that some of Shell’s competitors will be interested in hiring trained people.

Sadly, the unions go on

[The Australian Manufacturing Workers Union NSW secretary Tim Ayres] said it was time for the NSW government to seek assurances from Shell about the potential impacts of the closure, such as in reducing competition, raising prices and disrupting oil supply in NSW.

“If I was in (Premier) Barry O’Farrell’s shoes, I’d really want to be assured that we’ve got certainty over fuel supply,” he said.

“We really think it’s a big test for the NSW government,” he said.

“They should be rolling up their sleeves, getting engaged with Shell and with industry, and making sure we’ve got a viable future for that site.”

(h/t NineMSN, again)

So they want the government to force Shell to keep the site open at a loss, so that a (imaginary) degradation in competition will not occur. Ignoring the fact that Shell will continue to put as much refined oil in to the market for a moment, how far does this plan by the unions extend? What happens if this refinery ends up costing so much that Shell Australia can no longer pay its bills and has to put everyone out of work…do we make the government force them to continue to operate and force their creditors to write-off the debt. Similar government interference in the United States has already led to a financial collapse in recent years.

No, what matters here is not whether the refinery “needs to close” as the unions would put it, but rather what Shell want to do in order to make a profit and continue to be able to employ people as a result. If Shell want to close it down, then so be it. If somebody else wants to buy the site (or some other site) and try their hand at competing, then so be it. It’s called the free market, and it works by allowing businesses the freedom to shape their businesses as they see fit, to prosper, and as a result to employ people. From time to time this results in some job losses, but it also results in more employment. The freer the market, the greater the levels of overall employment.

The unions may argue with this and think that having the government dictate terms of employment and operation to businesses is the way to go, but it has failed each and every time. If Union bosses were really interested in the needs of their members, they would focus on wage and condition claims, but instead it seems that the vast majority of people in the upper echelons of the unions are more interested in claiming a spot in a centralised government-run economy than in looking after their members…is it any wonder that with antics like this, people are leaving unions in droves?

Samuel

Entry Filed under: General News,Samuel's Editorials

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