Colonial Pipeline shutdown: Gas prices, shortages, when will service be restored?

Alabama and other states in the Southeast are experiencing the effects of the Colonial Pipeline shutdown, as some stations are reportedly out of gas and at least one state has taken extraordinary measures.

Colonial Pipeline said Monday afternoon that parts of its system are being brought back online, and it hopes to restore service by the end of the week, CNBC is reporting. A cybersecurity attack forced the Colonial Pipeline to shut down its entire system, from Texas to New York City.

What will it mean for fuel prices?

Alabama - along with Florida, Georgia, the Carolinas and Tennessee - relies on the Colonial Pipeline for most of its fuel supplies. The network ships more than 2.5 million barrels per day of gasoline, diesel and jet fuel to customers throughout the eastern U.S., or about 45% of all fuel consumed on the East Coast.

“Segments of our pipeline are being brought back online in a stepwise fashion, in compliance with relevant federal regulations and in close consultation with the Department of Energy, which is leading and coordinating the Federal Government’s response,” Colonial Pipeline said in a statement.

AAA’s gas price average for Alabama this morning stood at $2.985 cents, up from yesterday’s average of $2.96. In Alabama, the average is $2.72, an increase of 4 cents in one day.

“The time of the outage is now approaching critical levels and if it continues to remain down we do expect an increase in East Coast gasoline and diesel prices,” said Debnil Chowdhury, IHS Markit Executive Director. The last time there was an outage of this magnitude was in 2016, he said, when gas prices rose 15 to 20 cents per gallon. The Northeast had significantly more local refining capacity at that time.

Gasoline futures ticked higher Monday. Futures for crude and fuel, prices that traders pay for contracts for delivery in the future, typically begin to rise anyway each year as the driving season approaches. The price you pay at the pump tends to follow.

The average U.S. price of regular-grade gasoline has jumped 6 cents over the past two weeks, to $3.02 per gallon, which is $1.05 higher than a year ago. The year-ago numbers are skewed somewhat because the nation was going into lockdown due to the pandemic.

The attack on the Colonial Pipeline could exacerbate the upward pressure on prices if it is unresolved for a period of time.

Georgia on Tuesday suspended its gas tax as prices rose, the AJC reported.

Will gas supplies run out?

The pipe shutdown yesterday prompted North Carolina Gov. Roy Cooper to sign an executive order declaring a state of emergency in North Carolina. The order temporarily suspends motor vehicle fuel regulations and trucking restrictions in order to maintain adequate fuel supplies.

At the same time, stations throughout the Southeast are reportedly out of gas. Some Atlanta area stations and pumps in North Carolina are shut down. Bloomberg is reporting that an estimated 7% of gas stations in Virginia were out of fuel as of late Monday.

WTVY in Dothan, for example, is reporting that multiple stations in the Wiregrass are out of gas. Some of those outages, however, could be caused by panic buying instead of supply issues.

A few stations in and around the Gadsden area had bags on pumps to indicate they were inactive. One station got a welcome visit from the fuel truck to replenish its tanks.

Posts on social media show there are other Alabama cities were stations have run out of gas.

AAA is urging motorists to avoid panic buying of gasoline.

It recommends planning trips ahead to accomplish multiple errands at once, and avoiding high-traffic times of day.

Also, minimize use of air conditioning, as open windows have less effect on fuel economy than the engine power required to operate the air conditioning compressor.

When will service be restored?

The company said Monday that it was working toward “substantially restoring operational service” by the weekend.

It said that it was evaluating the product inventory in storage tanks at its facilities. Biden administration officials stressed that Colonial proactively took some of its systems offline to prevent the ransomware from migrating from business computer systems to those that control and operate the pipeline.

In response to the attack, the administration loosened regulations for the transport of petroleum products on highways as part of an “all-hands-on-deck” effort to avoid disruptions in the fuel supply.

How did this happen?

President Biden stopped short of blaming the Kremlin for the Friday attack, but said “there’s evidence” the hackers or the software they used are “in Russia.”

“They have some responsibility to deal with this,” he told reporters at the White House on Monday, after announcing that “my administration will be pursuing a global effort of ransomware attacks.”

The FBI confirmed Monday that ransomware made by a group known as DarkSide was used in the attack. The group posted a message on its dark web page suggesting an affiliate was behind the attack and that it would vet buyers of its ransomware in the future to “avoid social consequences.”

“We are apolitical. We do not participate in geopolitics,” the message says. “Our goal is to make money and not creating problems for society. From today, we introduce moderation and check each company that our partners want to encrypt to avoid social consequences in the future.”