Biggest US gasoline pipeline restarts after cyberattack

The largest gasoline pipeline in the U.S. is returning to service, recovering from a cyberattack late Friday that sent pump prices surging and triggered shortages across the Eastern U.S.
Colonial Pipeline Co. -- a critical source of gasoline and diesel for the New York area and the rest of the East Coast -- said it began to resume fuel shipments around 5 p.m. Eastern time Wednesday. In a further effort to provide relief, the Biden administration temporarily waived century-old shipping restrictions to allow foreign tankers to transport fuel to areas with shortages.

It’s unclear how long it will take for supplies to come back to normal, though. U.S. Energy Secretary Jennifer Granholm said Tuesday it would take days to fully restore supplies after the pipeline’s restart, while Colonial indicated it will get its physical operations up and running ahead of its business systems. It also could take up to a week for foreign-flagged tankers to fill the supply gap.

"Resumption of flows is the start, but the race to logistically replenish retail gas stations is the next step,” said Michael Tran, an analyst at RBC Capital Markets. "The restarting of the Colonial pipeline is the beginning of the end of the crisis, not the end.”

The developments came as gasoline stations were running dry from Florida to Virginia after Colonial was forced to take systems offline on May 7. In parts of the U.S. South, three in every four gas stations had no fuel as of Wednesday, while in Washington, D.C., cars were lining up for blocks as they waited to fill up.

Optimism that the situation will start returning to normal sent benchmark gasoline futures down as much as 1.6%, after pump prices soared above $3 a gallon for the first time in six years.

The White House said Colonial’s announcement "means there’s an end in sight for the supply disruptions.” President Joe Biden is also urging Americans "to just purchase what they need, and not hoard fuel, as supply is restored,” Press Secretary Jen Psaki said in a statement Thursday.

Jones Act

The administration temporarily issued a waiver for a single company to the 101-year-old Jones Act, which stipulates goods transported between U.S. ports be carried on ships built in the U.S. and crewed by American workers.

Waiving the requirements could allow foreign-flagged tankers to fill the supply gap left by the interruption to the pipeline. It would take roughly six to seven days for a tanker to carry fuel from the Gulf Coast to New York Harbor.

Earlier this week, the White House announced several other measures to blunt the growing crisis, including waiving some gasoline requirements and empowering 10 states to allow heavier-than-normal truck loads of fuels.

Despite the improved outlook, the disruption underscores just how vulnerable America’s fuel supply system has become in the wake of increased attacks on energy infrastructure by hackers over the past few years. Colonial is only the latest example of critical infrastructure being targeted by ransomware. Hackers are increasingly attempting to infiltrate essential services such as electric grids and hospitals.

The attack on Colonial also came just as the nation’s energy industry is preparing for summer travel and as fuel demand rebounds from pandemic-related lockdowns. It was reminiscent of a 2018 cyberattack that brought down a third-party communications system used by several natural gas pipelines operators across the U.S.

Colonial, which each day normally ships about 2.5 million barrels (105 million gallons) -- an amount that exceeds the entire oil consumption of Germany -- warned the line may go down again from time to time while it’s in the process of restarting.

In a separate bulletin to its shippers, it said the company was physically starting operations even before its business systems - which process nominations for space on the pipeline and schedule them - are back up and running. As a result, it’ll be using schedules that were set five days ago until its systems are back in service, the notice shows.

Feeling Relief

As the pipeline resumes operations, the states suffering from the most acute shortages may start to feel relief this weekend.

In North Carolina, some fuel supply should appear right away, said Gary Harris, executive director of the North Carolina Petroleum & Convenience Marketers, a trade association. "People will have to be running trucks a lot to just catch up because so much is out at this time,” he said.

Major branded stations will get fuel first as they are under contract with suppliers, said Harris. Fuel may still be scarce for independent stations that are not under contract.

Royal Dutch Shell Plc said it was pursuing alternative supply points, where possible, and working in close coordination with wholesalers to address supply and logistical challenges.

In Virginia, consumers should be able to see a difference by Monday, said Michael O’Connor, president of the Virginia Petroleum & Convenience Marketers Association.

This isn’t the first time Colonial has been forced to shut down. In 2016, an explosion kept the system offline for days, raising gasoline prices and forcing the New York Harbor market to become more dependent on imports of fuel from overseas.

The Federal Bureau of Investigation attributed the attack on Colonial to ransomware created by a group called DarkSide. Some evidence emerged linking DarkSide to Russia or elsewhere in Eastern Europe. Biden said Russia has "some responsibility” to address the attack but stopped short of blaming the Kremlin, saying "there’s evidence” the hackers or the software they used are "in Russia.”