Why French workers’ strike could be another energy headache for Europe

The French government has ordered staff at an Exxon Mobil fuel depot back to work, intervening in a weeks-long wage dispute between workers and the oil companies that has severely disrupted fuel supplies across the country.

The order came on Wednesday more than two weeks after workers at TotalEnergies and Esso-ExxonMobil refineries and a fuel depot started the strike on September 27. It has taken over 60 percent of France's refining capacity offline - 740,000 barrels per day (bpd).

In the last few weeks, long queues were seen snaking out of petrol stations across the country, with 19 percent reporting severe supply shortages, according to government estimates. 

One of the trade unions involved in the strike, the CGT, has rejected an agreement with management at ExxonMobil signed by two other unions. This prompted the government to requisition staff at the depot, while the CGT called for support from workers in other sectors. 

On Wednesday, some workers at nuclear plants owned by the majority state-owned Electricite de France resumed their strike, delaying maintenance work on at least eight reactors.

The CGT said it intends to challenge the government’s requisitions in court once it receives an official notice. The government said it could adopt similar measures for workers at TotalEnergies if talks fail.

What caused the crisis?

Europe is in the midst of one of its worst cost-of-living crises in decades, as governments deal with rising energy costs as a result of the fallout from the war in Ukraine.

Inflation across the European Union had reached 10 percent in August, with the highest recorded in the Baltic states of Latvia, Estonia and Lithuania, where it reached 21-25 percent. In France, inflation was registered at 6,6 percent.

European countries are also bracing for an energy crunch this winter as Russia slashes gas supplies to the continent in retaliation for Western sanctions over the war in Ukraine – causing energy prices to hit record highs.

How has it impacted fuel prices beyond France?

Imports of oil products have surged by 40 percent in the first two weeks of October, pushing up diesel costs.

Some 1.5 million bpd are expected to be offline across Europe in October, tightening already-strained supplies, particularly of middle distillates used in freight transport, manufacturing, farming, mining, and oil and gas extraction.

The consequences of the French crisis are being felt across global markets. According to the Reuters news agency, European and American diesel-refining margins have hit an all-time high this week. 

Sanctions against Russia also play a role as the European Union tries to source around 600,000 bpd of diesel to replace Russian imports ahead of a ban that is scheduled to begin in February – driving prices even higher.

What are workers demanding?

The CTG trade union is demanding a 10 percent pay rise for workers, including a share of the companies’ profits. So far, strikers have been able to obtain a 6 percent pay rise. 

Energy companies have been profiting massively from the high energy costs, mostly caused by gas shortages. 

TotalEnergies has proposed starting annual wage negotiations this month rather than waiting until later in the year, on the condition that output be guaranteed.