America’s largest fuel pipeline system, the Colonial Pipeline, was forced to shut down on Friday after a cyberattack saw hackers steal huge amounts of data from the company’s network in just two hours.
The 8,850-kilometre pipeline transports more than 100 million gallons, or 2.5 million barrels, of refined products like diesel, gasoline and jet fuel each day. This equates to nearly 50 per cent of all fuel consumed on the US’ east coast.
"This is as close as you can get to the jugular of infrastructure in the United States," managing director of the Climate Policy Lab, Amy Myers Jaffe, told Reuters.
"It's not a major pipeline. It's the pipeline."
What happened at the Colonial Pipeline?
Last week, hackers touted to be part of a cybercrime gang called DarkSide stole nearly 100 gigabytes of data out of Colonial’s network, Alpharetta.
People involved in the investigation told Bloomberg that Colonial was hit by a ‘double-extortion’ scheme: the hackers not only threatened that the data they stole would be leaked to the internet, but also other data that they had encrypted inside the network would remain locked – unless Colonial paid a ransom.
A day after the attack, Colonial made the decision to shut down the pipeline, but didn’t confirm when it would reopen. They said they would “bring our full system back online only when we believe it is safe to do so, and in full compliance with the approval of all federal regulations”.
It has since brought on third-party cybersecurity firms to try to restore its IT system.
The pipeline has previously been shut down as a result of hurricanes, leaks, explosions and system problems – but never a cyber hack.
How will this affect petrol prices in Australia?
Down Under, we likely won’t feel any major flow-on effects as a result of the shutdown, according to AMP chief economist, Shane Oliver.
“It [the shutdown] only impacts the distribution of petrol in the US and hopefully will be short lived,” he told Yahoo Finance.
“There could be a temporary increase in sympathy, but it would be short lived and hard to justify. Much like there was little impact from the Suez blockage.”
Peter Khoury, head of media for the NRMA told Yahoo Finance that he also expects prices to remain stable.
“It’s very much a domestic issue for the US market,” he said. “If there is any impact globally, it would be very minor.”
What about the US?
It will be a different story in the US, given the sheer volume of petrol the Colonial Pipeline transports each day.
After the shutdown was reported on Friday, gasoline futures on the New York Mercantile Exchange gained 0.6 per cent, while diesel futures rose 1.1 per cent, according to Reuters.
And if the situation continues, experts predict retail petrol prices will rise.
As it stands, Colonial hasn’t confirmed when the Pipeline will reopen. A prolonged shutdown has industry experts concerned retail petrol prices could rise above US$3 per gallon for the first time since 2014.
“As every day goes by, it becomes a greater and greater impact on Gulf Coast oil refining,” Andrew Lipow, president of Lipow Oil Associates, told Reuters. “Refiners would have to react by reducing crude processing because they've lost part of the distribution system.”
However, in a report released on Sunday, Goldman Sachs said since there was no physical damage to the pipeline, any disruption was likely to be brief, and higher fuel prices were “likely to be transient”.