Gas prices could reach a 3-year high after a cyberattack on America’s largest fuel pipeline.
CHARLOTTE — North Carolina Gov. Roy Cooper on Monday signed an executive order declaring a State of Emergency in the state due to the temporary shutdown of the Colonial Pipeline.
Colonial Pipeline says a cyberattack forced it to temporarily halt all operations on a major pipeline that delivers roughly 45% of all fuel consumed on the East Coast.
“Today’s emergency declaration will help North Carolina prepare for any potential motor vehicle fuel supply interruptions across the state and ensure motorists are able to have access to fuel,” said Cooper in a statement.
In South Carolina, Gov. Henry McMaster said his office has been in constant contact with the Office of Regulatory Staff about the shutdown and will be ready to take any additional steps that may be necessary.
“Because our state is currently under a state of emergency, transportation waivers and price gouging laws are in effect to facilitate fuel delivery and protect consumers,” McMaster said. “There is no need to rush to top off your gas tanks or hoard gas. The pipeline is expected to resume operations by the end of the week.”
Colonial said the attack took place Friday and also affected some of its information technology systems. The company transports gasoline, diesel, jet fuel and home heating oil from refineries primarily located on the Gulf Coast through pipelines running from Texas to New Jersey
The Alpharetta, Georgia-based company said it hired an outside cybersecurity firm to investigate the nature and scope of the attack and has also contacted law enforcement and federal agencies.
“Colonial Pipeline is taking steps to understand and resolve this issue,” the company said in a late Friday statement. “At this time, our primary focus is the safe and efficient restoration of our service and our efforts to return to normal operation. This process is already underway, and we are working diligently to address this matter and to minimize disruption to our customers and those who rely on Colonial Pipeline.”
Colonial Pipeline said it hopes to have most of its services restored by the end of the week.
Oil analyst Andy Lipow said the impact of the attack on fuel supplies and prices depends on how long the pipeline is down. An outage of one or two days would be minimal, he said, but an outage of five or six days could causes shortages and price hikes, particularly in an area stretching from central Alabama to the Washington, D.C., area.
Lipow said a key concern about a lengthy delay would be the supply of jet fuel needed to keep major airports operating, like those in Atlanta and Charlotte.
The FBI confirmed on Monday that the Darkside ransomware that cultivates a Robin Hood image of stealing from corporations and giving a cut to charity was responsible for the compromise of the Colonial Pipeline.
The FBI said they are continuing to work with Colonial Pipeline and government partners to investigate the cyberattack.
Officials said the hackers infiltrated Colonial Pipeline and demanded money in exchange for the gas company to regain control of their operation.
Ransomware scrambles a victim organization’s data with encryption. The criminals leave instructions on infected computers for how to negotiate ransom payments and, once paid, provide software decryption keys. While there have long been fears about U.S. adversaries disrupting American energy suppliers, ransomware attacks are much more common and have been soaring lately.
Mike Chapple, teaching professor of IT, analytics and operations at the University of Notre Dame’s Mendoza College of Business and a former computer scientist with the National Security Agency, said systems that control pipelines should not be connected to the internet and vulnerable to cyber intrusions.
“The attacks were extremely sophisticated and they were able to defeat some pretty sophisticated security controls, or the right degree of security controls weren’t in place,” Chapple said.
Brian Bethune, a professor of applied economics at Boston College, also said the impact on consumer prices should be short-lived as long as the shutdown does not last for more than a week or two. “But it is an indication of how vulnerable our infrastructure is to these kinds of cyberattacks,” he said.
Cyber security expert Eric Cole told Channel 9 major corporations like Colonial Pipeline were a prime target for ransomware attack because the pandemic caused companies to operate online, leaving them vulnerable.
“In oil and gas, you have operation tech systems that are meant to be isolated from the work remote force. We created a lot of exposures,” Cole said.
Cole said he hasn’t worked with Colonial with this ransom attack, but said with other similar cases, gas companies normally pay the ransom of $1-2 million because it could take months to rebuild their system.
Cyber experts said corporations from utility companies, hospital systems and all cities and counties should be on alert, saying it is not a matter of it but when they will be targeted. Cole said the impacts will eventually trickle down to the ordinary people who will pay the price.
Bethune noted the shutdown is occurring at a time when energy prices have already been rising as the economy re-opens further as pandemic restrictions are lifted.
According to the AAA auto club, the national average for a gallon of regular gasoline has increased by four cents since Monday to $2.94.
Colonial Pipeline said it transports more than 100 million gallons of fuel daily, through a pipeline system spanning more than 5,500 miles.
The FBI and the White House’s National Security Council did not immediately return messages seeking comment. The federal Cybersecurity Infrastructure and Security Agency referred questions about the incident to the company.
A hacker’s botched attempt to poison the water supply of a small Florida city raised alarms about how vulnerable the nation’s critical infrastructure may be to attacks by more sophisticated intruders.
Anne Neuberger, the Biden administration’s deputy national security adviser for cybersecurity and emerging technology, said in an interview with The Associated Press in April that the government was undertaking a new effort to help electric utilities, water districts and other critical industries protect against potentially damaging cyberattacks. She said the goal was to ensure that control systems serving 50,000 or more Americans have the core technology to detect and block malicious cyber activity.
Since then, the White House has announced a 100-day initiative aimed at protecting the country’s electricity system from cyberattacks by encouraging owners and operators of power plants and electric utilities to improve their capabilities for identifying cyber threats to their networks. It includes concrete milestones for them to put technologies into use so they can spot and respond to intrusions in real time. The Justice Department has also announced a new task force dedicated to countering ransomware attacks in which data is seized by hackers who demand payment from victims in order to release it.
(WATCH: Huntersville neighbors eager for answers about Colonial Pipeline gasoline leak)
How will gas pipeline cyberattack impact prices at the pump?
Gasoline futures ticked higher Monday following the cyberextortion attempt on a vital U.S. pipeline that carries fuel from the Gulf Coast to the Northeast.
The Colonial Pipeline transports gasoline and other fuel through 10 states between Texas and New Jersey. It delivers roughly 45% of fuel consumed on the East Coast, according to the company.
Colonial Pipeline said Saturday that it had been hit by a ransomware attack and had halted all pipeline operations to deal with the threat. The FBI confirmed on Monday that the Darkside ransomware that cultivates a Robin Hood image of stealing from corporations and giving a cut to charity was responsible for the compromise of the Colonial Pipeline.
Futures for crude and fuel, prices that traders pay for contracts for delivery at some point in the future, typically begin to rise each year as the driving season approaches. The price you pay at the gas 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 it was a year ago. Those 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 that upward pressure on prices if it is unresolved for a period of time. Futures jumped 1.5% Monday, the largest movement in about a week, with the potential for disruptions in fuel delivery still unknown.
For the moment, seesawing prices may be felt mostly within the energy industry as suppliers adjust to potential shifts in the flow of gasoline.
Some gas stations around Charlotte were already experiencing gas shortage issues. In Rock Hill, Channel 9 saw long lines as people were waiting to fill their tanks up. Some other places were completely sold out.
The Shell station on Reames Road in Charlotte had signs on their pumps limiting the amount of gas people can buy.
More fuel may be sourced from East Cost refiners, J.P. Morgan said Monday, and an extended outage along the Colonial Pipeline would force suppliers to seek fuel from the Midwest, rather than the Gulf.
In the Carolinas, gas prices have increased significantly on the week as the Colonial Pipeline outage threatens prices and supply. AAA has forecasted that gas prices will climb even more in reaction to the shutdown.
“The impact of this pipeline outage will vary regionally,” spokesperson for AAA Carolinas said. “The outage will have implications on both gasoline supply and prices. The longer it is offline, the larger the impact on the east coast.
According to AAA, “on the week, North Carolina’s gas price average increased by 6 cents, currently sitting at $2.73 – this is 10 cents more expensive than last month and $1.06 more expensive than a year ago. South Carolina’s gas price average increased by 7 cents on the week, currently sitting at $2.67 – this is 9 cents more expensive than last month and $1.10 more expensive than a year ago.”
With Colonial Pipeline shut down, some drivers told Channel 9 they are bracing to pay more at the pump.
“It costs a fortune to get back and forth to work,” driver Patricia Bomgardner said. “This would be too much considering the price of everything else has rise in this past year.”
After meticulous budgeting all year long, Bomgardner said higher gas prices would be almost unbearable.
“I’m so frustrated with this whole year, but this is like too much,” Bomgardner said. “It’s just one more thing that takes us into major stress.”
In response to the attack, the Biden 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.
Once the pipeline is up and running, AAA said there could be residual delays because it takes about 15 to 18 days for fuel to flow from Texas to New York.
AAA made these recommendations in order to avoid “panic-buying” of gasoline and conserving fuel:
- Plan ahead to accomplish several errands in one trip and whenever possible, avoid high-traffic times of the day
- If you own more than one car, use the most fuel-efficient model
- Remove unnecessary and bulky items from your car and minimize the use of roof racks and special carriers — it takes more fuel to accelerate a heavy car
- Minimize the use of air conditioning
The Associated Press contributed to this report.