

Prices are up and queues are long on forecourts, and as the two sides square off in the Grangemouth dispute, bosses warn of job losses
Customers filling up at a petrol station in Linlithgow
Customers filling up at a petrol station in Linlithgow. Some Scottish garages are rationing fuel. Photograph: Murdo Macleod Murdo Macleod/Guardian

Motorists are being urged not to panic-buy petrol following the closure overnight of Britain's largest oil pipeline because of a strike by workers at the Grangemouth refinery in Scotland.

As the Forties pipeline - which supplies one third of the United Kingdom's oil and gas - began shutting down for the first time in its history yesterday, queues formed on forecourts in Scotland and northern England. Some petrol stations rationed supplies, while others were forced to close after running dry.

In London, garages were busier than usual with some reporting panic-buying and queues. Petrol station staff said many drivers were buying £80 or £90 worth of fuel, both to beat any shortage and also to avoid any price rises.

Amid fears that the situation could soon spread to other parts of the UK and cause a petrol shortage, the government was forced to make a dramatic appeal for calm.

'There is plenty of petrol and diesel in Scotland to meet demand during this period of time,' said the Business Secretary, John Hutton. 'But of course there is going to be a challenge if people change the way that they consume fuel.'

Labour MP Russell Brown arrived back from Westminster on Friday night to find queues at filling stations in his Dumfries and Galloway constituency.

He said while there was no need to stockpile it was hard to stop once it had started. 'The psychological thing is if you are driving past and you see a queue, people tend to join the queue,' Brown said.

He said one businessman in his constituency seeking to buy dyed red diesel - a cheaper oil used for off-road and agricultural vehicles - had approached half a dozen local suppliers, but had been told it would cost him 5p a litre more than usual and 10p more if he bought more than 1,000 litres.

'That looks like clear profiteering and it's an opportunity to rip people off,' Brown said. 'I have noticed that the price of petrol has gone up significantly. People feel badly off because fuel is at such a high level right across the country and if somebody's trying to squeeze an extra two or three pence out of this, that is not on.'

Relations between unions and management at Grangemouth plunged to a new low yesterday as both sides engaged in a war of words that suggests the dispute is unlikely to be resolved soon.

The Observer understands that the Unite union, which represents some 800 or so of the striking workers at the refinery, in north east Scotland, is considering the possibility of further industrial action as it continues its protest against a decision by the plant's owner, Ineos, to close a final salary scheme to new workers.

Yesterday Ineos upped the ante by signalling that a crucial £750m investment in the plant could be jeopardised by the threat of further industrial action.

'The hard part is the union don't seem to understand that by taking this action, Ineos Capital, who run the company, have choices to make about where they put their money,' said Ian Fyfe, human resources manager at Ineos.

'We need this huge investment to make this thing profitable in the long term. They've got a choice: they can say 'we'll put that money in Norway, or France or Germany, and not Grangemouth.

'We've assessed that, without this investment, huge amounts of this plant will close down and we'll lose 650 jobs, half the workforce. That's what's at stake. That would be a tragedy.'

The temporary closure of the refinery means engineers have, since 6am today, been forced to shut down the connecting Forties pipeline, which brings in some 750,000 barrels of oil a day into the UK and links the mainland with some 70 fields and 80 companies operating in the North Sea. The pipeline is also responsible for some 30 per cent of the UK's gas supplies.

The move to shut the pipeline has prompted dismay among organisations representing the offshore oil and gas industry, who warn that the dispute is costing the UK economy some £50 million a day.

Yesterday Oil & Gas UK, the body which represents offshore oil and gas companies, called for urgent government intervention in the dispute. It said there was a need to ensure that the row over the Grangemouth refinery was not allowed to harm the pipeline again. 'The longer this dispute runs the larger the impact on the UK economy and also the Treasury's revenues,' a spokeswoman for Oil & Gas UK said.

The strike could not have come at a worse time for the government, which is taking a battering in the polls ahead of what promises to be a summer of discontent. Prices at the pump are already well over £1 a litre. A typical family car now costs £54.37 to fill - £8 more than a year ago.

Yesterday attention switched to the business practices employed by Ineos, the third-biggest chemical company in the world, which made profits of £414m in 2005 and employs 16,000 people in 20 countries. The owner, Jim Ratcliffe, is the UK's 45th richest man with an estimated £3bn fortune.

There are claims - denied by the company - that it has engaged in anti-union activity in both Norway and Texas. Privately, sources close to the union accuse the firm of buying up assets and then cutting costs through the introduction of new working practices.

Ineos bought the Grangemouth refinery from BP in 2005. It inherited the final salary pension scheme, which it now wants to close. 'It is one of the most expensive pension plans in the UK,' Fyfe said. 'We can't afford it.'

After talks which began last September at the conciliation service, Acas, more than 97 per cent of the workers voted for the strike action. Union sources accuse Ineos of issuing a press release saying that talks had broken down even before they had begun.

Ineos accuses the unions of intransigence. Fyfe said: 'You expect both parties in traditional negotiations to come and go a bit, but since September the union has taken a position and not budged one inch.'

The strike is due to end at 7pm on Tuesday, but it will take weeks before the refinery - and days before the pipeline - are back to full operational activity. The union needs to give the company seven days' notice if it is to take further industrial action.