Gas stations running dry after pipeline hack

Gas stations along the East Coast are starting to run out of fuel as North America’s biggest petroleum pipeline fights to recover from a cyberattack that has paralyzed it for days.

From Virginia to Florida and Alabama, fuel stations are reporting that they’ve sold out of gasoline as supplies in the region dwindle and panic buying sets in. The White House said it was aware of shortages in the Southeast and is trying to alleviate the problem.

Four days into the crisis, Colonial Pipeline Co. has managed only to operate a small segment of the pipeline manually as a stopgap measure and doesn’t expect to be able to substantially restore service before the weekend. The risk is that by that point drivers or airlines may already be suffering severe fuel shortages, while refineries on the Gulf Coast could be forced to idle operations because they have nowhere to put their product.

U.S. average retail gasoline prices have risen to their highest since late 2014 due to the disruption, almost touching $3 per gallon. That could add to broader inflationary pressures as commodity prices from timber to copper also surge.

The Colonial pipeline is the most important conduit to distribute gasoline, diesel and jet-fuel in the U.S., moving the products from the refiners based on the Gulf Coast into urban areas from Atlanta to New York and beyond. Each day, it ships about 2.5 million barrels—more than the entire oil consumption of Germany—connecting more than 20 refineries with about 200 distribution centers.

The vital conduit has been shut down since late Friday. Without the Colonial pipeline, many cities and airports must seek alternative supplies, either fuel imported by tanker or, if landlocked, relying on trucks.

On Monday, the Federal Bureau of Investigation pointed the finger at a ransomware gang known as DarkSide. While cyberattacks are increasingly used around the world as a weapon against geopolitical rivals, there was no indication that the current crisis could boil over internationally. President Joe Biden stopped short of blaming the Kremlin for the attack, despite some evidence that the hackers or the software they used are “in Russia.”

Russia has no connection to the cyberattack, Kremlin spokesman Dmitry Peskov told reporters on Tuesday.

Colonial Chief Executive Officer Joe Blount and a top lieutenant assured Deputy Energy Secretary David Turk and state-level officials that the company has complete operational control of the pipeline and won’t restart shipments until the ransomware has been neutralized.

Government officials haven’t advised Colonial on whether it ought to pay the ransom, Deputy National Security Adviser for Cyber and Emerging Technologies Anne Neuberger said during a briefing.

In the meantime, fuel supplies are dwindling just as the nation’s energy industry was gearing up to meet stronger fuel demand from summer travel. Americans are once again commuting to the office and booking flights after a year of covid-19 restrictions.

In the first sign of the potential disruption to air travel, American Airlines Group Inc. said it was adjusting two long-haul routes that originate in Charlotte, North Caroline, to add fuel stops. Flights to Hawaii will call in at Dallas-Fort Worth airport, while London-bound aircraft will make a stop in Boston.

Airlines flying out of Philadelphia International Airport are burning through jet-fuel reserves and the airport has enough to last “a couple of weeks,’ a spokeswoman said.

The U.S. East Coast is losing around 1.2 million barrels a day of gasoline supply due to the disruption, according to a note from industry consultant FGE.

In Asheville, N.C., Aubrey Clements, a clerk at an Exxon Mobil Corp. station answered the phone with “Hello, I’m currently out of gas.” The Marathon gas station in Elizabethtown, N.C., had roughly two dozen cars waiting to fuel up, said an employee there.

Drivers pulling into a station with a sign offering unleaded gasoline for $2.649 per gallon in Manning, S.C., were met with pumps covered in yellow and red “out of service” bags. An estimated 7% of gas stations in the state of Virginia were out of fuel as of late Monday, according to GasBuddy analyst Patrick DeHaan.

In an 18-minute virtual meeting, Blount said Colonial is working with refiners, marketers and retailers to prevent shortages, according to a person involved with the meeting who wasn’t authorized to speak publicly about the discussion. The pipeline serves 90 U.S. military installations and 26 oil refineries, the person said.

The shutdown has prompted frenzied moves by traders and retailers to secure alternative supplies. Oil tanker charter rates skyrocketed in the U.S. with refiners scrambling for ships to store fuel that has nowhere to go.

Emergency shipments of gasoline and diesel from Texas are already on the way to Atlanta and other southeastern cities via trucks, and at least two Gulf Coast refineries began trimming output amid expectations that supplies will begin backing up in the nation’s oil-refining nexus.

The national average retail gasoline price rose to $2.985 a gallon, the highest since November 2014, according to AAA. The premium for wholesale gasoline in the New York area expanded to its widest in three months.

The event is just the latest example of critical infrastructure being targeted by ransomware. Hackers are increasingly attempting to infiltrate essential services such as electric grids and hospitals. The escalating threats prompted the White House to respond last month with a plan to increase security at utilities and their suppliers. Pipelines are a specific concern because of the central role they play in the U.S. economy.

Ransomware cases involve hackers seeding networks with malicious software that encrypts the data and leaves the machines locked until the victims pay the extortion fee. This would be the biggest attack of its kind on a U.S. fuel pipeline.

DarkSide said in a post on the dark web that it wasn’t to blame and hinted that an affiliate group may have been behind the attack. The group promised to do a better job of screening customers that buy its malware.

“It’s an all-hands-on-deck effort right now,” said U.S. Commerce Secretary Gina Raimondo. “We are working closely with the company, state and local officials to make sure that they get back up to normal operations as quickly as possible and there aren’t disruptions in supply.”

The White House pulled together an interagency task force to address the breach, including exploring options for lessening its impact, according to an official. Biden can invoke an array of emergency powers to ensure supplies keep flowing to big cities and airports along the East Coast.

Some rules curbing domestic transportation of fuel have been eased to help deal with any shortages. That doesn’t extend to waiving the Jones Act, a measure that would allow foreign tankers to help shuffle more petroleum products between U.S. ports.

The Northeast can secure gasoline shipments from Europe but it will come at an increasing cost the longer the pipeline stays shut. In the meantime, fuel producers including Marathon Petroleum Corp. are weighing alternatives for how to ship their products to the Northeast.

Landlocked cities face the greatest danger of fuel shortages compared with those with access to waterborne deliveries, said Steve Boyd, senior managing director at Houston-based distributor Sun Coast Resources Inc. If the pipeline remains down for many more days, he’s anticipating a “massive surge” in orders.