A cyber-attack on the Colonial Pipeline, the largest pipeline system for refined oil products in the US, has led to a fuel shortage in much of the south-east of the country. The pipeline is 5,500 miles long, carries up to 3m barrels of fuel per day between Texas and New York and supplies the East Coast with 45% of its fuel.

The shutdown of the pipeline occurred on Friday, May 7, after a ransomware cyber-attack. It was announced on Wednesday, May 12, that operations had resumed. Meanwhile, the states of Florida, Virginia, North Carolina and Georgia have all declared states of emergency. South Carolina, the District of Columbia, Maryland and Tennessee are also seeing shortages. The result has been panic-buying, a hike in prices and disruption to freight transportation.

As the news spread it caused somewhat of a frenzy, the panic-buying exacerbated the shortage and led to thousands of gas stations running out of fuel this week. The disruption and ensuing worry also led to price increases. Various sources including GasBuddy have reported the average price of gas rose to $3 per gallon, this is the highest price seen since late 2014. The American Automobile Association noted the price was 7% higher on Wednesday, May 12, than the week prior.

Of course, any disruption to fuel supply is going to impact freight transportation. Although diesel powers the majority of highway freight trucks in the US and whilst diesel does not appear to be as severely impacted, there has been a ripple effect for trucking. Dale Bennett, the President of the Virginia Trucking Association, said some members who buy diesel in bulk are seeing delivery delays. “They are having to wait three days for delivery of fuel rather than the usual same-day delivery for bulk storage to fuel their trucks.” Additionally, it has been reported that stations without gasoline have closed diesel pumps as well, which has led to rerouting and extra time on journeys and thus more fuel consumption.

In terms of express operations, CNN Business reported the major shipping companies in the US, Amazon, FedEx and UPS, are not commenting on whether the shortage has impacted their operations in the region. These large companies tend to use onsite fuel storage and therefore may not feel the full impacts of the shortage. However, smaller express and last-mile providers as well as the region’s gig economy workers have already felt effect such as losing out on jobs and spending excessive time searching for fuel. They also said they foresee further financial impacts as services are not expected to resume for several days.

GardaWorld is advising logistics providers to plan for potential commercial trucking disruptions and freight delivery delays as Colonial Pipeline has said the service will not return to normal for several days.

Currently, this doesn’t seem to be affecting the wider market, although where disruptions have occurred, several have been acute and it may be a number of weeks before supply and demand fully rebalance. Logistics companies with their own fuel storage have not had to change or pause operations and although trucking has faced some disruptions, they appear seemingly minor. Whilst a fuel shortage is significant, its impacts on the logistics industry are currently moderate. However, any further disruptions to supply and there may be difficulties down the road.

Source: Transport Intelligence, May 13, 2021

Author: Holly Stewart

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