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US fuel sellers scramble for alternatives to hacked pipeline
Colonial Pipeline halted all operations on its system as a precautionary measure Friday after suffering a cyberattack that affected some of its IT systems, the company said in a statement Saturday.
Gasoline suppliers are rushing to secure alternative methods of delivery to avert fuel shortages from Atlanta to New York after a ransomware attack shut down the nation’s biggest oil-products pipeline.
Traders and fuel shippers are seeking barges and ships to deliver gasoline that would have otherwise been shipped on the Colonial Pipeline system, according to people familiar with the matter. Others are securing tankers to temporarily store gasoline in the U.S. Gulf in the event of a prolonged shut down, they said.
Colonial Pipeline halted all operations on its system as a precautionary measure Friday after suffering a cyberattack that affected some of its IT systems, the company said in a statement Saturday. It’s working to restore operations, though no timeline for restart is yet available.
The attack comes just as the nation’s energy industry is preparing to meet stronger fuel demand associated with summer travel. Gasoline demand has grown steadily this year as the nation’s most populous states emerge from lockdowns and ease most economic restrictions. As more Americans get vaccinated, many are once again commuting to the office, planning summer trips for the first time and booking flights. In preparation, U.S. refiners have been ratcheting up their operations to levels seen before the outbreak devastated oil demand last March.
The pipeline is a key component in delivering gasoline, diesel and jet fuel to the East Coast from the nation’s refining belt along the U.S. Gulf Coast. It has the capacity to send about 2.5 million barrels a day on its system from Houston as far as North Carolina, and another 900,000 barrels a day to New York. Ransomware cases involve hackers seeding networks with malicious software that encrypts the data and leaves the machines locked until the victims pay the extortion fee. This would be the biggest attack of its kind on a U.S. fuel pipeline.
A key concern at present is meeting product demand in the U.S. Southeast, which is especially dependent on the Colonial system, the sources said. The Northeast can secure gasoline shipments from Europe, the sources said. Though doing so will come at an increasing cost the longer the pipeline stays shut.
“The longer it lasts, the more bullish it will be for refined products on the East Coast,” said Warren Patterson, head of commodities strategy at ING Groep NV. “This will likely also drag European product prices higher, as we see more waterborne cargoes needing to go into the U.S. East Coast to meet the shortfall.”
An alternative might be to use the Kinder Morgan-operated Plantation Pipeline, though it only extends as far north Washington D.C. Its capacity at 720,000 barrels a day is far short of Colonial’s and already has other users moving supplies, one of the people familiar said.
