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Colonial restarts pipeline with supply chain far from normal

Read more at www.bnnbloomberg.ca

​The largest fuel pipeline in the U.S. restarted its entire system after a cyberattack nearly a week ago, but said it will take several days for the supply chain to return to normal.

Colonial Pipeline Co. has started delivering products like gasoline, diesel and jet fuel to all of the markets it serves, the pipeline operator said in a statement on Thursday, but some areas may experience service interruptions during the restart process. The system, which transports products from Gulf Coast refineries as far north as New York, is running at less than half of capacity, according to people familiar with the matter.

Earlier, it emerged that the operating company paid almost US$5 million in untraceable cryptocurrency to Eastern European hackers last week to help get gasoline and jet fuel flowing again along the Eastern Seaboard. Fuel shortages from Florida to Virginia continue and Colonial said its system is about 5.5 days behind its current schedule.

In a message to filling stations, U.S. President Joe Biden said in a White House briefing on Thursday, “Do not — I repeat, do not — try to take advantage of consumers during this time.”

The attack on Colonial occurred just weeks before the U.S. Memorial Day Holiday and the start of the summer driving season, with many Americans expected to eagerly take to the roads and the skies after pandemic-induced lockdowns. Over the last few years, attacks by hackers to critical energy infrastructure have become more common. In 2018, a cyberattack brought down a third-party communications system used by several natural gas pipelines operators across the U.S.

Earlier in the week, average U.S. pump prices surged above US$3 a gallon for the first time in six years as motorists raced to fill tanks. U.S. gasoline futures rose to US$2.1051 a gallon on Friday after dropping 3 per cent on Thursday. More than half of stations in Virginia, North Carolina and South Carolina were still without fuel Thursday, according to retail-tracker GasBuddy. And in Miami, an area not even directly fed by the pipeline, nearly 40 per cent of stations are without gasoline.

Hospitals, railroads and ambulance services that rely on fuel for generators are the main priority as supply trickles in, said Cheryl Waters, president of Atlanta Fuel Company, which services customers in states including Georgia, North Carolina and east Alabama. She expects it will take 10-14 days for her company’s operations to return to normal.

“We’re just being very careful with who we sell our fuel to,” said Waters. “We’re saving it back for our essential businesses.”

While Colonial works to resume normal operations, it said that some line segments were operated manually and may be ahead of the 5.5 day estimated delay.

Meanwhile, TravelCenters of America is also curbing purchases in some regions, including parts of Tennessee. Trot Raney, a trucker from Wake Forest, North Carolina, shared with Bloomberg photos of signs advising US$200 limits on diesel purchases at a TCA in Knoxville. He said he was taking a few days off to avoid the shortages.

“We may be limiting the amount of gallons per purchase depending on location and supply availability in the local market. As the Colonial Pipeline restarts production, we anticipate intermittent diesel and gas outages for the next several days while the supply chain returns to normal operations,” according to a TCA spokeswoman.

As of Thursday morning, about 20,000 barrels an hour of gasoline and other refined products were flowing east on Colonial’s pipeline out of Baton Rouge, Louisiana, according to people who asked not to be identified because the information is commercially sensitive. Throughput starts outside of Houston at 25,000 barrels an hour and slows from there beyond Baton Rouge, the people said.

Amid the constraints, fuel traders were even paying each other extra to gain access to the pipeline, the first time that’s happened since before the pandemic.

New York Attorney General Letitia James issued an alert to New Yorkers concerning potential gasoline price gouging and urged consumers to report dramatic price increases.

“Don’t panic,” Biden said on Thursday. “I know seeing lines at the pumps or gas stations with no gas can be extremely stressful, but this is a temporary situation. Do not get more gas than you need the next few days.” Biden also said the pipeline should be reaching fully capacity soon.

Meanwhile, a top U.S. energy regulator said gaps in pipeline cybersecurity must be filled following the Colonial attack. “We need to improve our cybersecurity standards and requirements to keep up with these evolving threats, especially as they relate to our critical infrastructure,” Neil Chatterjee, a commissioner and former chairman at the Federal Energy Regulatory Commission, said in a Bloomberg Television interview on Thursday.

In an effort to ease the crisis, the Biden administration earlier this week temporarily waived century-old shipping restrictions to allow one foreign-flagged ocean-going tanker to transport gasoline and jet fuel to the East Coast. The White House also waived some gasoline requirements. empowering 10 states to allow heavier-than-normal truck loads of fuels.

Colonial normally ships about 2.5 million barrels (105 million gallons) each day, an amount that exceeds the entire oil consumption of Germany. This isn’t the first time Colonial has been forced to shut down. In 2016, an explosion kept the system offline for days, raising gasoline prices and forcing the New York Harbor market to become more dependent on imports of fuel from overseas.

Read more at www.bnnbloomberg.ca

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