The Colonial Pipeline Cyberattack Could Make Gas Prices Skyrocket
Wait, what? The Colonial Pipeline had to be shut down due to a cyberattack? Now the United States is issuing emergency legislation that’s effective immediately to assist with fuel shortages along the east coast? Let’s catch everyone up to speed on this matter.
Was the Colonial Pipeline hit by a ransomware attack?
According to The Washington Post, a ransomware attack led to the entire shutdown of the Colonial Pipeline, one of the largest fuel pipeline systems in the nation. It carries almost half of the gasoline, diesel, and other fuels on the East Coast.
The pipeline operator fell prey to the cyberattack on Friday, but on Sunday, Colonial Pipeline operators shared that a restart plan is being developed. Also, a few smaller lines are now operational.
U.S. officials believe that the attack was carried out by an Eastern European-based criminal gang known as DarkSide. Shutting the system helped to protect critical information and data. After gaining access to private networks and crucial information during attacks like these, the system is locked up. The attackers generally demand a ransom fee to free things up.
When will the pipeline reopen?
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It may take the Colonial Pipeline a few days to a few weeks to reopen. According to CNBC, the pipeline transports 2.5 million barrels of fuel a day. It connects to refineries in the U.S. Gulf Coast to more than 50 million people in the Southern and Eastern United States.
Emergency legislation has been issued to aid fuel delivery while the system is down. President Joe Biden declared a regional emergency, allowing new measures to go into action. As a result, the USDOT’s Federal Motor Carrier Safety Administration issued a temporary hours-of-service exemption.
The exemption allows truckers who carry refined petroleum products such as gasoline, diesel, and jet fuel to operate outside of their regular hours. This exemption will last until the end of the emergency or until June 8, depending on which is first.
Generally, truck drivers can only operate for 11 hours a day, but for the time being, they can put in extra hours to deliver supplies to Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, and Virginia.
Are gas prices going to rise?
Maybe, the impact on gas prices will vary based on when the Colonial Pipeline comes back online. If the pipeline is partially restarted by Wednesday, May 12, then no significant or long-lasting impacts are expected.
If it takes six to 10 days to reopen, then inventories will rise in the U.S. Gulf Coast, causing fuel prices to fall as prices in the East Coast rise. If it takes more than 10 days to come back online, then refineries in the Gulf Coast may have to reduce their runs, and oil prices may be affected. This could also cause significant fuel shortages in the South East.
The market is responding very cautiously, as it’s unclear when the pipeline will reopen. Gasoline futures are up by 1.28 percent, to $2.1542 per gallon. Heating oil futures have increased by 0.73 percent to $2.0252.
As the outage continues, the shortages could become more severe. In the next few days, East Coast residents may see products start running low or completely out. But all we can do is keep an eye on things for now.
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