Traders and shippers are growing worried about the possibility of a fuel shortage in the eastern United States almost two days after a major pipeline closed in a cyber attack.
Colonial Pipeline said on Sunday it was still developing a plan to restart the country’s largest fuel pipeline and would only bring it back online when it was “safe to do so and in full compliance. with the approval of all federal regulations “. All major segments of the colonial system remain offline, with so-called smaller side lines between specific terminals and serving delivery points, the company said.
With little to no clarity on the system’s return date, traders are looking for ships to deliver gasoline that would otherwise have been shipped on the colonial system, according to market participants who asked not to be identified because the information is not public. Some tankers are being secured to temporarily store gasoline in the US Gulf in the event of an extended shutdown, they said.
Colonial, the country’s largest fuel pipeline, halted all operations on its system on Friday evening aftervictim of a cyber attack which affected some of its computer systems.
The attack comes as the nation’s energy industry prepares to meet greater demand for fuel from summer travel and could raise more concerns about inflation asCorn oil commodity prices rebound in a post-pandemic rebound. Americans go to the office again, plan major trips for the first time, and book flights. Prolonged disruption along the pipeline network threatens to send the national average price of gasolineabove $ 3 a gallon for the first time since October 2014, a threshold that often raises the concern of federal lawmakers worried about the impact on consumers.
The lagging jet fuel oil market is expected to experience a 30% increase in demand
“It’s an ongoing effort right now,” US Secretary of Commerce Gina Raimondo said of the federal government’s actions as the shutdown continued. “We are working closely with the company, national and local authorities to make sure they come back until normal operations as quickly as possible and there are no disruptions in supply. “
Colonial is just the latest example of critical infrastructure targeted by ransomware. Hackers increasingly try to infiltrate essential services such as power grids and hospitals. Escalating threats prompted the White House to respond last month with a plan to increase the security of utilities and their providers. Pipelines are of particular concern because of the central role they play in the US economy.
Colonial is a critical source of gasoline, diesel and jet fuel to the East Coast from the country’s refining belt along the US Gulf Coast. It has the capacity to send approximately 2.5 million barrels per day on its system from Houston to North Carolina, and an additional 900,000 barrels per day to New York.
The attack appears to use a ransomware group called DarkSide, according to Allan Liska, senior threat analyst at cybersecurity firm Recorded Future. Cyber security firm FireEye Inc. said its incident response division at Mandiant was helping with the investigation.
Ransomware cases involve hackers who seed networks with malware that encrypts data and leaves machines locked until victims pay extortion costs. It would be the biggest attack of its kind on an American fuel pipeline.
The national gasoline average was $ 2.96 a gallon on Friday, according to the AAA Automobile Club. With gasoline stocks plentiful, the price at the pump is not expected to rise much until Memorial Day at the end of May, which is traditionally considered the start of the summer driving season in the United States. If the pipeline does not restart quickly, it will accelerate the movement higher.
“I think we have a good chance of doing that by Memorial Day given the current trends,” said Patrick De Haan, head of petroleum analysis at Gas Buddy.
One of the main concerns right now is meeting demand for products in the southeastern United States, which is particularly dependent on the colonial system, people familiar with the situation said. Drivers of landlocked, car-dependent Atlanta may be the first to Feel pinching at the pump.
“Atlanta will be one of the first pain points, along with eastern Tennessee, and possibly the Carolinas,” De Haan said.
The Northeast can secure gasoline shipments from Europe, but it will cost more and more the longer the pipeline remains closed.
“The longer this goes on, the more optimistic he will be about refined products on the East Coast,” said Warren Patterson, head of commodity strategy at ING Groep NV. “It will likely lead to higher prices for European products as well, as we see more cargo by water having to go to the east coast of the United States to fill the gap.”
Airports on the East Coast, which continue to record some of the biggest drops in air traffic due to the pandemic, are performing well on Sunday, according to the flight tracking website.FlightAware.com.
In the meantime, fuel producers, including Marathon Petroleum Corp., are considering alternatives for how to ship their products to the northeast.
One potential route is the Morgan-operated KinderPlantation Pipeline, although it only extends north of Washington DC and has a capacity of 720,000 barrels per day, far from that of Colonial. Kindersaid on Sunday he was working with customers to accommodate additional barrels during Colonial’s breakdown, and that Plantation postpone any non-essential maintenance that could otherwise reduce flow rates to the extent possible.
Inventories provide minimal coverage, ClearView Energy Partners said in a research note. Oil tankers leaving Rotterdam could take until 14 days to make the trip to New York Harbor. The Midwest could theoretically send some of its supplies to the East Coast by rail and barge, but inventories in the region are tighter than in previous years, ClearView said.
“The Colonial breakdown comes at a critical time for the recovery of the US economy: the start of the summer driving season, ”ClearView said. “We therefore believe that lawmakers could immediately start a ‘blame game’, and a sustained disruption leading to a significant spike in prices at the pump could increase the prospects for national policy interventions.”
– With the help of Alex Longley, Gerson Freitas Jr, Tony Czuczka, Alan Levin and Jack Wittels