HOUSTON – The operator of the largest Texas-New York oil pipeline that was shut down after a ransomware attack declined on Sunday to say when it would reopen and raised concerns about critical infrastructure that covers nearly half of the country East coast transports fuel supply.
While the shutdown has had little impact on gasoline, diesel, or jet fuel supplies so far, some energy analysts warned that prolonged exposure could raise prices at the pump along the east coast and some smaller airports could look for jet fuel.
Colonial Pipeline, the pipeline operator, said Sunday afternoon that it is developing a “system restart plan” and will restore service to some small lines between terminals and delivery points, “but will not bring our entire system back online until we believe it safe is to do that. “
The company, which shut down the pipeline on Friday, admitted on Saturday that it was the victim of a ransomware attack by a criminal group, meaning the hacker could potentially take the company’s data hostage until he pays a ransom . The privately owned Colonial Pipeline wouldn’t tell if it paid a ransom. Not having given a schedule for reopening on Sunday, the company re-asked whether the pipeline’s operations could still be jeopardized.
The shutdown of the 5,500 mile pipeline was a worrying sign that the country’s energy infrastructure is vulnerable to cyberattacks from criminal groups or nations.
Energy experts predicted that traders would take the company’s announcement on Sunday as a sign that the pipeline would remain closed for at least a few days. Tom Kloza, global head of energy analysis at Oil Price Information Service, said he expected gasoline futures to rise 2 to 3 percent from Sunday evening and Monday.
Nationwide, the AAA Motor Club reported that the average price for regular gasoline did not move from $ 2.96 per gallon from Saturday to Sunday. New York state prices remained stable at $ 3, and prices rose a fraction of a penny per gallon in some southeastern states like Georgia, which are considered particularly vulnerable if the pipeline does not reopen quickly.
The pipeline attack occurred at the beginning of the summer driving season, when fuel prices traditionally rise anyway.
“Even a temporary shutdown will likely cause national retail gas prices to rise above $ 3 per gallon for the first time since 2014,” said Jay Hatfield, chief executive of Infrastructure Capital Management and investor in natural gas and oil pipelines and storage.
Goldman Sachs said in a report on Sunday that higher fuel prices on the east coast “are likely to be temporary” as the pipeline has not been physically damaged.
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Experts said several airports depend on the jet fuel pipeline, including Nashville, Tenn .; Baltimore-Washington; and Charlotte and Raleigh-Durham, NC, could have a tough time later in the week. Airports usually store enough jet fuel for three to five days of operation.
White House officials held meetings on the pipeline attack over the weekend. White House press secretary Jen Psaki said in a tweet that they are looking for ways to “mitigate potential supply disruptions.”
To mitigate the impact, the transportation department on Sunday lifted some restrictions on the transportation of gasoline, diesel and jet fuel by road to address so-called “emergency conditions”.
One reason prices have stopped rising so far is that the east coast generally has plenty of fuel on hand. While fuel consumption grows, it remains depressed due to the prepandemic.
Nevertheless, there are some weak points in the supply system. Inventories in the southeast are a little lower than normal for this time of year. Refining capacity in the Northeast is limited, and the Northeast Gasoline Supply Reserve, an emergency-stop supply, only holds a total of one million barrels of gasoline in New York, Boston and South Portland, Maine.
This is not enough for even a single day with average regional consumption. That is according to a report released on Saturday by Clearview Energy Partners, a Washington-based research firm. “Much depends on the length of the failure,” the report said.
When Hurricane Harvey paralyzed several Gulf Coast refineries in 2017 and halted flows of petroleum products from the colonial pipeline to the northeast for nearly two weeks, spot gasoline prices in New York Harbor rose more than 25 percent and took nearly a month to subside.
Regional refineries can supplement their shipments through Kinder Morgan’s Plantation Pipeline, which runs between Louisiana and Northern Virginia. However, its capacity is limited and it does not reach any major metropolitan areas north of Washington, DC
The east coast has ample ports for importing petroleum products from Europe, Canada, and South America, but this can take time. Tankers sailing at speeds of up to 14 knots from Rotterdam in the Netherlands can take up to two weeks to get to the port of New York.
Mr Kloza said the Biden administration could suspend the Jones Act, which requires goods shipped between American ports to be transported on American-built and operated ships. This would allow foreign flag tankers to move additional barrels of fuel from Gulf ports to ports on the Atlantic coast. The Jones Act is usually suspended in emergencies such as hurricanes.
“One could argue that the Biden administration might consider such a move sooner rather than later if problems with the colonial software persist,” said Kloza.