Energy & Environment

Pipeline shutdown prompts gas price fears

A gas pump with final amount of cost
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Uncertainty surrounding the operations of a major pipeline following a cyberattack is prompting some fears about gas prices and supply if the issues continue long term.  

The main line of the Colonial Pipeline, which transports about 2.5 million barrels of oil per day, remained shut down on Monday following a ransomware attack late last week.

Debnil Chowdhury, head of Americas refining at IHS Markit, said that last time part of the pipeline shut down, in 2016, increases were at about 10 or 20 cents per gallon. 

“We could eventually see that happening here if this does not get resolved quickly,” Chowdhury said. “My suspicion is that movements will start this week if we don’t see something happen.”

He added that one reason that prices have to go up is to incentivize Europe and Asia to send barrels to the U.S.

The American Automobile Association (AAA) also forecasted that prices would climb this week. 

“This shutdown will have implications on both gasoline supply and prices, but the impact will vary regionally. Areas including Mississippi, Tennessee and the east coast from Georgia into Delaware are most likely to experience limited fuel availability,” said spokesperson Jeanette McGee, in a statement. “These states may see prices increase three to seven cents this week.”

Patrick De Haan, head of petroleum analysis at GasBuddy, also raised potential supply concerns. 

“This is growing more painful,” he said. “Breathing room in the supply chain is rapidly dwindling … so in the next 24 to 48 hours, we’re starting to look at some physical disruptions that may take place.” 

He added that this will depend on motorists, and that people should avoid panic buying to not put strains on the system.

However, after opening at a higher $65.57 per barrel on Monday, prices for West Texas Intermediate, the U.S. benchmark, fell by about a dollar as of mid-morning. 

Tom Kloza, global head of energy analysis at the Oil Price Information Service,  argued that unless this goes on for a long time, it’s not going to be a “seminal” pricing or supply event. 

“The market’s calming down quite a bit. There’s still a lot of trepidation when you have such a big artery that’s shut down for a while, but we opened sharply higher last night and now we’re about unchanged,” Kloza said. 

“I think that there’s plenty of gasoline and diesel in the North Atlantic,” he added. “If you get north of Baltimore, that region can be supplied by plentiful imports.”

Colonial Pipeline has not yet provided a timeline for reopening, and federal investigations into the cyberattack are ongoing as of Monday.

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