Oil Workers Strike in Brazil in Another Hit to the Government

A strike of 72 hours by oil workers in Brazil halted rigs and refiners on Wednesday, said union leaders. The move is the latest blow to the government of President Michel Temer following a protest by truckers that has strangled the largest economy in Latin America for more than a week.

The oil workers are demanding changes be made at the state-led Petroleo Brasileiro SA in the most recent challenge for what is known more commonly as Petrobras, whose share price plunged close to 30% in the last two weeks due to fears that interference politically would unwind recent policies that were investor-focused.

The political and economic storm has helped to shake the lame duck government of Temer prior to the elections in October and rattled the nerves about Petrobras’ path forward. Petrobras is the largest oil producer in all of Latin America.

It also has increased the spreading of protests to other sectors as frustrations are vented by Brazilians with the highly unpopular government that has been hurt by an uneven recovery of the economy.

With protests by truckers over high prices of diesel, sources in the government said that Temer was considering ending a fuel pricing policy that is market-based. However, by Wednesday the office of the president issued a prepared statement saying Temer would keep the policy.

The strike in the oil sector included workers on 25 or more of the 46 Petrobras oil rigs it operates in the highly lucrative Campos basin, which is responsible for close to half of the entire petroleum production for Brazil.

The largest union of oil workers in Brazil, FUP, said seven of the rigs had been paralyzed.

Petrobras said that prior to the strike that disruptions would not have any immediate impact on output or operations overall. Brazil produces close to 2.1 million barrels per day of oil.

According to one source within the company, Petrobras has significant stocks of fuel already on hand especially as the trucker protest that is 10 days old prevented large amounts from leaving their refineries.

The roadblocks by truckers and the resulting shortage of fuel have stopped major industries and hurt exports of things from soybeans to beef and cars to coffee.

The trucker protest of 10 days has left large cities short of food, medical supplies and gasoline, and government officials have warned it is going to take several days to have supply lines restored.