With the hacking of the Colonial pipeline, the price of gasoline has skyrocketed on the East Coast, while long lines of cars are beginning to be seen in gas stations due to fuel shortages.
The impact of the cyber-attacks is not minor, through the Colonial Pipeline approximately 45% of the fuel consumed on the East Coast is transported. According to the operators of the line, they expect to restore operations by the end of this week.
Cyber-attacks on the Colonial pipeline have caused the price of a gallon of gasoline to rise to $3 for the first time in seven years, according to the American Automobile Association. The last time gas prices topped $3 on the East Coast was in November 2014.
This is the second major blow to the U.S. oil industry following the Biden administration’s blocking of the Keystone XL pipeline.
Gas prices rose because of the Colonial pipeline hack, but it is not the only factor
The attack led consumers to stockpile gasoline, and with it came shortages in several cities, where lines for fuel could last for hours.
In the states of Pennsylvania, New York, Connecticut, Maryland, and New Jersey they faced prices over $3 per gallon. Although the pipeline has returned to normal operations, the Colonial company had to pay the group of hackers identified by the FBI as “Dark Side” $5 million dollars to release the hacked system.
According to Theresa Payton, former cybersecurity official during the Bush administration, “our energy infrastructure is under attack and has been under attack for the past several decades not only on a physical basis, but digitally as well.”
For Payton, the U.S. energy infrastructure is still very exposed to cyber-attacks, and the integration of new technologies such as the 5G internet to old infrastructure systems makes cybersecurity systems vulnerable to attacks by hackers.
Although the attack affected prices, the truth is that the cost of all fuels has been on the rise since last year. The oil shortage responds more to a structural problem of the sector generated by Covid-19 than to the malice of some terrible Russian hackers.
The oil industry is falling short in the face of growing demand
During 2020 with the repeated quarantines around the world, the oil industry took a big hit when demand for liquid fuels fell by as much as 9%. During the first months of the lockdowns many companies were fearful of a possible irreparable blow to the oil industry and began to make risky investments in renewable energy.
Among the names announcing investments in renewables were BP, Royal Dutch Shell, Total SE, and Chevron. While oil companies announced investments exceeding billions of dollars in renewable projects, investment in the oil sector plummeted; according to the International Energy Agency’s 2020 report, investment in oil and gas fell by 35%.
Now in 2021, the consequences of that decision are beginning to be felt, as oil supply appears to be falling short of growing demand from economies recovering from the aftermath of the pandemic.
In fact, over the next few years oil giant BP sees demand returning to 2018-2019 levels, placing daily consumption at 97-98 million barrels per day.
According to BP’s report in the worst-case scenario oil demand would fall by 15% by 2030, i.e. fall to 82 million barrels, but in its baseline scenario demand would hold at 94 million barrels. In other words, unless something catastrophic happens where energy demand falls or fossil fuels are banned outright, the oil sector will remain a source of energy for a long time to come.