The US faces a possible energy crisis after a cyber attack on a major oil pipeline

Biden resorts to declaration of a regional state of emergency

The president of the United States, Joe Biden, has been forced to lift restrictions on the transport of fuel by road in order to avoid any shortages due to the closure by a cyberattack of Colonial, the largest network of oil pipelines in the country. After that, oil prices, both Brent and West Texas, show advances that have reached the percentage point. Gasoline futures have been hit the hardest with gains of 4% hitting three-year highs.

Biden’s decision will allow trucks carrying gasoline, diesel, jet fuel and other refined products to circulate without time restrictions to 17 states in the southern and eastern US, as well as the District of Columbia, the Department of Transportation said in a statement. . To lift these restrictions, the president had to resort to the declaration of a regional state of emergency.

Among other things, Efe points out , the measure allows drivers to transport fuel without having to take breaks of several hours, as established by federal law. Biden has made that decision after Colonial had to suspend all its operations on Friday due to a cyberattack .


Colonial, based in Georgia, has had to interrupt its operations in the 8,850 kilometers of oil pipelines it manages and which are essential to supply the large population centers in the eastern and southern United States. The company transports up to 2.5 million barrels of gasoline, diesel and jet fuel per day from refineries in the Gulf of Mexico to the southern and eastern US.

Vita importance of this network

Its importance is vital for the east coast of the country, since it is responsible for 45% of the transportation of fuels in that area, according to its website. In a statement Sunday night, Colonial explained that its main lines for transporting fuel remain out of service, but some smaller pipelines between terminals and delivery points are already operational.


The company has suffered a ransomware attack in which a group of hackers blocked access to company computers and asked for money to release them. Colonial has not revealed who could be behind the attack, although cybersecurity experts point to DarkSide , a group supposedly based in Eastern Europe, as a possible suspect .

One of the largest public attacks suffered by the US

The company has not provided details on how long the pipelines will be closed. It also hasn’t revealed how much money hackers are asking to free their computers. According to cybersecurity company Coveware, last year ransomware victims had to pay an average of $ 310,000 to unlock their computer systems. This is one of the biggest ransomware attacks ever made public in the US.

On Saturday, US President Joe Biden was informed of the incident, according to a White House spokesman, who assured that government cybersecurity agencies are doing everything possible so that Colonial can restore fuel transportation as soon as possible.

Some lawmakers have already called for tighter regulations to protect the country’s energy infrastructure and have expressed concern about the impact it could have on fuel prices.

At the moment, the consequences of the stoppage suffered by Colonial is unpredictable, it will depend on how long it takes to reestablish the service, but it comes at a delicate moment with an unstoppable increase in fuel demand, which will be greater as summer approaches and the service opens. airspace with other regions of the world.

On paper there is the potential for replacement products to be dumped, leading to traders sourcing shipments from Europe or Asia. “For now, the market is giving the company the benefit of the doubt that this will be resolved in no time,” John Kilduff, Founding Partner of Again Capital explains to Bloomberg . Still, he warns of problems across the country “if there is a decline in the arrival of production at the port of New York or at other supply points on the East Coast.”

The closure of some of Colonial’s transportation networks is likely to lead to increased fuel reserves, as well as shortages, throughout different parts of the network. There is concern that some refineries may be forced to reduce processing fees.

“If it continues, you would expect refineries to start cutting execution rates,” says Warren Patterson, ING Group’s director of commodity strategy. “Gasoline stocks nationwide are quite low, but if you look at the US Gulf Coast, they are above the five-year average.”

If it complicates the situation, the Jones Act clould be suspended to facilitate maritime transport

Merchants and transporters are already looking for solutions to replace the passage through Colonial’s infrastructure. The first is to take the fuel into the sea to make the deliveries. Others just want to store it.

Amid the disruption, there could also be calls to suspend the Jones Act, according to Again Capital’s Kilduff, to facilitate the shipping of the fuel with foreign vessels.

President Joe Biden can invoke a series of emergency powers to ensure that supplies continue to flow to large cities and airports along the East Coast.

The national average for gasoline stood at $ 2.96 a gallon on Friday, according to the AAA Automotive Club. Prices were not expected to rise much until Memorial Day (May 31), which is traditionally considered the start of the summer driving season. If the pipeline is not restarted soon, prices will go up.

Where you may first start to notice rising prices is in the area of ​​Atlanta, which is landlocked and extremely independent of Colonial’s infrastructure. “Atlanta will be one of the first sore spots, along with eastern Tennessee and perhaps the Carolinas,” says Patrick De Haan, head of oil analysis at Gas Buddy.

The Northeast can secure gasoline shipments from Europe, but it will cost more the longer the pipeline remains closed. The fuel premium over crude in northwestern Europe had risen more than 5% in intraday trading earlier on Monday, but continued to decline week-over-week.

“The longer it lasts, the more optimistic it will be for refined products on the east coast,” they say from ING. “This will likely drive up the prices of European products as well, as we see that more ocean freight needs to go to the east coast of the US to cover the deficit.”

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