Pipeline Shutdown Has Had Little Impact on Supplies So Far

HOUSTON – The shutdown of the largest oil pipeline between Texas and New York on Friday after a ransomware attack had little immediate impact on gasoline, diesel or jet fuel supplies. However, some energy analysts warned that prolonged exposure could raise prices at the pump along the east coast.

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.

There is no evidence that motorists are panicking or that gas stations are undermining their customers at the start of the summer driving season, when gasoline prices traditionally rise.

But gasoline shortages could arise if the pipeline operated by Colonial Pipeline closes later this week, some analysts said.

“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.

The shutdown of the 5,500 mile pipeline that carries nearly half of the east coast’s fuel supplies was a worrying sign that the country’s energy infrastructure is vulnerable to cyberattacks by criminal groups or nations.

Colonial Pipeline admitted on Saturday that it was the victim of a ransomware attack by a criminal group, which means the hacker can take the company’s data hostage until he pays a ransom. The privately owned company wouldn’t say whether it paid a ransom. They said it was working to get up and running as soon as possible.

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May 7, 2021 at 1:12 p.m. ET

One reason prices have not risen 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.

Tom Kloza, global director of energy research at Oil Price Information Service, 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.

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