Gas supplies dwindle in U.S. Southeast, prices climb due to pipeline outage

Gas stations from Florida to Virginia began running dry and prices at the pump jumped on Tuesday as the shutdown of the biggest U.S. fuel pipeline by hackers extended into a fifth day and sparked panic buying by motorists.

About 7.5% of gas stations in Virginia and 5% in North Carolina had no fuel on Tuesday as demand jumped 20%, tracking firm GasBuddy said. Prices rose to their highest in more than six years, and Georgia suspended sales tax on gas until Saturday to ease the strain on consumers. North Carolina declared an emergency.

Driver Caroline Richardson said she was paying 15 cents more per gallon than a week ago as she refueled at a gas station in Sumter, South Carolina. "I know some friends who decided not to go out of town this weekend to save gas," she said.

Colonial Pipeline has forecast that it will not substantially restore operations of the 5,500-mile pipeline network that supplies nearly half of the East Coast's fuel until the end of the week.

The company preventively shut the pipeline on Friday after hackers locked its computers and demanded ransom, underscoring the vulnerability of U.S. energy infrastructure to cyberattack. The strike on Colonial “is potentially the most substantial and damaging attack on U.S. critical infrastructure ever,” Ohio Senator Rob Portman told a Senate hearing on cybersecurity threats on Tuesday.

Unleaded gas neared an average $2.99 a gallon, its highest price since November 2014. The American Automobile Association urged consumers not to hoard, saying it would worsen shortages.

The FBI has accused a shadowy criminal gang called DarkSide of the ransomware attack. DarkSide is believed to be based in Russia or Eastern Europe and avoids targeting computers that use languages from former Soviet republics, cyber experts say.

Ransomware is a type of malware designed to lock computers by encrypting data and demanding payment to regain access.

Russia's embassy in the United States rejected speculation that Moscow was behind the attack. President Joe Biden a day earlier said there was no evidence so far that Russia was responsible.

A statement issued in DarkSide's name on Monday said: "Our goal is to make money, and not creating problems for society."

It is unknown how much money the hackers are seeking, and Colonial has not commented on whether it would pay.

"Cyber attacks on our nation’s infrastructure are growing more sophisticated, frequent and aggressive," Brandon Wales, acting director of the Cybersecurity and Infrastructure Security Agency (CISA), said on Tuesday at a Senate hearing on the SolarWinds hack that hit companies and government agencies.

GOVERNMENT STEPS IN

The Environmental Protection Agency issued a waiver on Tuesday that allows distributors to continue supplying winter fuel blends through May 18 in three Mid-Atlantic states to help ease supplies.

North Carolina and the U.S. Department of Transportation, meanwhile, relaxed fuel-driver rules, allowing truckers hauling gasoline to work longer hours.

There are growing concerns that the pipeline outage could lead to further price spikes ahead of the Memorial Day weekend at the end of this month. The weekend is the traditional start of the busy summer driving season.

Gulf Coast refiners that rely on Colonial's pipeline to move their products have cut processing. Total SE trimmed gasoline production at its Port Arthur, Texas, refinery and Citgo Petroleum pared back at its Lake Charles, Louisiana, plant, sources told Reuters.

Marathon Petroleum is "making adjustments" to its operations due to the pipeline shutdown, a spokesman said without providing details.

While the pipeline outage is having big short-term consequences in some regions, some experts believe the longer term impact will be small.

"Markets will go crazy, but two weeks later no one knows it happened," said Chuck Watson, director of research at ENKI, which studies the economic effects of natural and other disasters. (Reporting by Laura Sanicola, Stephanie Kelly and Devika Krishna Kumar; Editing by Barbara Lewis, Paul Simao and Cynthia Osterman)

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