Colonial Pipeline Co., operator of the massive fuel pipeline shut down over the weekend after a cyberattack, said Monday it is working to substantially restore operational service by the end of the week.
The announcement provided a potential timeline for bringing the top fuel pipeline to the East Coast back online.
Analysts had warned that a prolonged shutdown lasting five days or more could have supply consequences and raise fuel prices in southeastern states such as Georgia and Tennessee.
With no clear end in sight to the shutdown, energy traders braced Monday for rising fuel prices and pressure on drivers at the pump.
The 5,500-mile pipeline, the largest U.S. conduit for gasoline, runs from the Gulf Coast to Linden, N.J. It was shut after a cyberattack that involved ransomware, a type of code that can hold computer systems hostage for payment. The pipeline transports 45% of the fuel consumed on the East Coast, according to the company’s website.
The market response was volatile, with gasoline futures in New York up about 0.7% Monday morning at $2.14 a gallon, after they had advanced as much as 4.2% in overnight trading. But analysts said prices for gasoline, particularly spot prices in regions affected by the closure, could continue to rise if the pipeline isn’t back in service in a few more days.
Patrick De Haan,
head of petroleum analysis at price tracker GasBuddy, said crimped fuel supplies over the next few days would have the biggest impact in Georgia, North Carolina, South Carolina and Tennessee, all of which are highly dependent on the pipeline. Much of Tennessee’s fuel comes from lateral lines that extend from Colonial’s main line, he said.
“If this extends beyond Monday, it’s going to be a mess,” Mr. De Haan said.
Gasoline prices could rise 3 to 7 cents a gallon this week in affected areas such as Mississippi and Tennessee, as well as in East Coast states from Georgia to Delaware, according to AAA.
Gasoline futures are already up more than 50% in 2021, and average U.S. prices at the pump have climbed steadily and are approaching multiyear highs around $3 a gallon, data from GasBuddy show. Any prolonged disruptions could further pressure consumers during an expected surge in fuel demand, as U.S. motorists travel more after coronavirus restrictions ease, analysts said.
“This is happening at the worst time, heading into the summer, and also to the most vulnerable area,” said
managing director for global energy strategy at RBC Capital Markets. The East Coast is the least energy-secure U.S. region because of the dearth of refineries there, he said.
director of the futures division at Mizuho Securities USA, said traders were waiting for further communication from Colonial to assess possible disruptions.
“I’m willing to give them through Wednesday,” he said. “After that, you’re going to start to see people get a little more nervous about this.”
“Every hour counts at this point as we get closer and closer to Memorial Day weekend,” he added.
Colonial said Sunday that some smaller lateral lines between terminals and delivery points were once again operational. Its main lines remained offline as it was working to restore information-technology systems and developing a plan to restart the pipeline when it had approval from federal regulators.
‘This is happening at the worst time, heading into the summer, and also to the most vulnerable area.’
The Biden administration responded to the shutdown by issuing an emergency waiver Sunday that extended hours for truck drivers delivering fuel across 17 states, including Texas, where fuel supplies typically get ferried from refineries to the East Coast.
The cybersecurity recovery for the Colonial pipeline could take a few more days and possibly longer, said
a director of industrial control system security at consulting firm 1898 & Co., part of Burns & McDonnell in Houston.
“Given the breadth of the unknowns, the discovery, containment, decontamination and remediation effort will be lengthy and likely result in a gradual return to operations,” Mr. Ayala said.
Elsewhere in energy markets, U.S. crude-oil futures swung between small gains and losses and were recently down less than 0.9% at $64.33 a barrel. They have also risen this year amid expectations for surging demand. A prolonged pipeline shutdown could hurt oil prices if gasoline builds up in the Gulf Coast because refineries in the region might not need to take in as much crude to turn it into fuel products, analysts said.
Cyberattacks and the Energy Sector
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