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Pipeline outage causes U.S. gasoline supply crunch, panic buying

Stock MarketsMay 12, 2021 05:29PM ET
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2/2 © Reuters. FILE PHOTO: Holding tanks are seen in an aerial photograph at Colonial Pipeline's Dorsey Junction Station in Woodbine, Maryland, U.S. May 10, 2021. REUTERS/Drone Base 2/2

By Laura Sanicola and Devika Krishna Kumar

(Reuters) -Gas stations from Florida to Virginia began running dry and prices at the pump rose on Tuesday, as the shutdown of the biggest U.S. fuel pipeline by hackers extended into a fifth day and sparked panic buying by motorists.

The administration of U.S. President Joe Biden projected that the Colonial Pipeline, source of nearly half the fuel supply on the U.S. East Coast, would restart in a few days and urged drivers not to top up their tanks.

"We are asking people not to hoard," U.S. Energy Secretary Jennifer Granholm told reporters at the White House. "Things will be back to normal soon."

Colonial was shut on Friday after hackers launched a ransomware attack - effectively locking up its computer systems and demanding payment to release them.

The company said it is making progress and hopes to restart a substantial portion of operations by week's end. The company said it has taken delivery of an additional 2 million barrels from refineries for deployment upon restart.

"Markets experiencing supply constraints and/or not serviced by other fuel delivery systems are being prioritized," Colonial said in a statement.

The outage, which has underscored the vulnerability of vital U.S. infrastructure to cyberattacks, has already started to hurt.

In metro Atlanta, 30% of gas stations are without gasoline, tracking firm GasBuddy said. In Raleigh, North Carolina, 31% of gas stations had no fuel on Tuesday. Unleaded gas prices, meanwhile, hit an average $2.99 a gallon, its highest price since November 2014, the American Automobile Association said.

Colonial said it made recent deliveries to parts of Georgia, South Carolina, North Carolina, Maryland and New Jersey.

In an effort to ease the strain on consumers, Georgia suspended sales tax on gas until Saturday, and North Carolina declared an emergency. The federal government, meanwhile, has loosened rules to make it easier for suppliers to refill storage, including lifting seasonal anti-smog requirements for gasoline and allowing fuel truckers to work longer hours.

Granholm said there is not a shortage but a gasoline supply "crunch" in North Carolina, South Carolina, Tennessee, Georgia and Southern Virginia, regions that typically rely on Colonial for fuel.

Driver Caroline Richardson said she was paying 15 cents more per gallon than a week ago as she refueled at a gas station in Sumter, South Carolina. "I know some friends who decided not to go out of town this weekend to save gas," she said.

DARKSIDE HACK

The strike on Colonial “is potentially the most substantial and damaging attack on U.S. critical infrastructure ever,” Ohio Senator Rob Portman told a Senate hearing on cybersecurity threats on Tuesday.

The FBI has accused a shadowy criminal gang called DarkSide of the ransomware attack. DarkSide is believed to be based in Russia or Eastern Europe and avoids targeting computers that use languages from former Soviet republics, cyber experts say.

Russia's embassy in the United States rejected speculation that Moscow was behind the attack. Biden a day earlier said there was no evidence so far that Russia was responsible.

A statement issued in DarkSide's name on Monday said: "Our goal is to make money, and not creating problems for society."

It is unknown how much money the hackers are seeking, and Colonial has not commented on whether it would pay.

"Cyber attacks on our nation’s infrastructure are growing more sophisticated, frequent and aggressive," Brandon Wales, acting director of the Cybersecurity and Infrastructure Security Agency (CISA), said on Tuesday at a Senate hearing on the SolarWinds hack that hit companies and government agencies.

GOVERNMENT STEPS IN

The Environmental Protection Agency issued a waiver on Tuesday that allows distributors to continue supplying winter fuel blends through May 18 in three Mid-Atlantic states to help ease supplies.

North Carolina and the U.S. Department of Transportation, meanwhile, relaxed fuel-driver rules, allowing truckers hauling gasoline to work longer hours. North Carolina, Virginia and Florida have declared a state of emergency.

The U.S. has also started the work needed to enable temporary waivers of Jones Act vessels in response to the cyber attack - something that would allow foreign flagged fuel carriers to move from one U.S. port to another, the Transportation Department said.

There are growing concerns that the pipeline outage could lead to further price spikes ahead of the Memorial Day weekend at the end of this month. The weekend is the traditional start of the busy summer driving season.

Gulf Coast refiners that rely on Colonial's pipeline to move their products have cut processing. Total SE trimmed gasoline production at its Port Arthur, Texas, refinery and Citgo Petroleum pared back at its Lake Charles, Louisiana, plant, sources told Reuters. Citgo said it is moving products from its Lake Charles refinery and is "exploring alternate supply methods into other impacted markets."

Marathon Petroleum (NYSE:MPC) is "making adjustments" to its operations due to the pipeline shutdown, a spokesman said without providing details.

While the pipeline outage is having big short-term consequences in some regions, some experts believe the longer term impact will be small.

"Markets will go crazy, but two weeks later no one knows it happened," said Chuck Watson, director of research at ENKI, which studies the economic effects of natural and other disasters.

Pipeline outage causes U.S. gasoline supply crunch, panic buying
 

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Comments (18)
Hunt Richardson
Hunt Richardson May 12, 2021 2:04AM ET
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: "Our goal is to make money, and not creating problems for society." Bollocks. supp ose some emergency vehicles need gasoline and can't get it? in Northern Virginia at 10:00 p.m. every gas station had lines of cars lining up for gas 45 minutes long. very bad
Steve Blevins
Steve Blevins May 12, 2021 1:53AM ET
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It's all Biden's fault!
Patrick Niedermeyer
Patrick Niedermeyer May 12, 2021 1:53AM ET
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Wrong again.
Mark Stallone
Mark Stallone May 12, 2021 12:28AM ET
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Hey Joey.. The 70's called. They want their Economy, Foreign Policy, and overall Misery back.
Steve Lora
Steve Lora May 11, 2021 8:30PM ET
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Obama/Biden days are here again
Benjamin McIntire
Benjamin McIntire May 11, 2021 8:30PM ET
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Baby Steve need he bottle???
Vincent Vama
Vincent Vama May 11, 2021 7:09PM ET
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"Our goal is to make money, and not to creating problems for society." hehe lol!
Rick Baier
Rick Baier May 11, 2021 6:10PM ET
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Let's review. Toilet paper shortage, sanitizer shortage, chlorine shortage, gas shortage. Anyone else smell a rat?
Benjamin McIntire
Benjamin McIntire May 11, 2021 6:10PM ET
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Tin foil cutting off circulation to uour brain again
Investing Man
Investing Man May 11, 2021 6:09PM ET
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For as long as ive been alive the oil companies have been give enormous tax incentives, breaks, and subsidies from the american people... their ceos yachts and lambos keep running fine, but for some reason the rest of us are always faced with their crisis. Strange how that works
Marty Rankin
Marty Rankin May 11, 2021 5:54PM ET
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Great idea. Good lookin' out runnin' tanker drivers into the dirt.
Jim Jones
Jim Jones May 11, 2021 5:54PM ET
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Only way they make more than sitting on their ******at home collecting welfare.
Marty Rankin
Marty Rankin May 11, 2021 5:49PM ET
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U.S. Department of Transportation, meanwhile, relaxed fuel-driver rules, allowing truckers hauling gasoline to work longer hours.
Jim Jones
Jim Jones May 11, 2021 5:37PM ET
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Who trusts the government anymore? Remember when they said, multiple times, the risk to the American people is low? I would recommend buying as much gas as you can get your hands on before they botch another problem with another failed cover up.
Benjamin McIntire
Benjamin McIntire May 11, 2021 5:37PM ET
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Selfish and ignorant but ok
Elvis Durant
Elvis Durant May 11, 2021 3:29PM ET
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any lies to tank the markets
CHAD TENDIES
CHAD TENDIES May 11, 2021 2:40PM ET
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Nobody needs gas anymore we have teslas and work from home
Rick Baier
Rick Baier May 11, 2021 2:16PM ET
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Got 2 backup vechicles. Battery golf cart. And 05 Dodge cummins Diesel. My house is prepared
CHAD TENDIES
CHAD TENDIES May 11, 2021 2:16PM ET
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I traced your IP address thank you for letting me know where to get fuel
Rick Baier
Rick Baier May 11, 2021 2:16PM ET
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Gene Kret
Gene Kret May 11, 2021 10:46AM ET
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There are stations throughout NJ NY metro area reporting resuppy delays are serious and no dates being given.
Jimmy Stratton
Jimmy Stratton May 11, 2021 9:48AM ET
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There is NO near shortage of gasoline/oil supplies in this country . BAD report
Roger Miller
Roger Miller May 11, 2021 9:29AM ET
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Greta is probably so happy right now.
Ominous Owl
Ominous Owl May 11, 2021 9:29AM ET
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Oh the ignoramus.
Jay Means
Jay Means May 11, 2021 7:27AM ET
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Uncle joe intervention
Jay Means
Jay Means May 11, 2021 7:27AM ET
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So why did gasoline futures sell off
 
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