Critical Cyberattack Has Halted Operations Of The Colonial Pipeline

May 10, 2021 12:20 PM
Though most expect that the pipeline will be online soon, the company is not saying when
The Biden administration is moving quickly to address the threat
Tensions in the Gaza Strip should be watched
Energy Report

Energy Report

The Phil Flynn Energy Report 

Colonial Pipeline Pop

The cyberattack on the Colonial Pipeline is an act of terrorism and a major threat to the U.S. economy, as well as the health and well-being of average Americans. While the cyberattack may have a short-term impact on the price of crude oil and gasoline, assuming they can bring the pipeline back online quickly, we can't ignore the fact that this attack, along with others like it, is a major national security threat. 

This vulnerability in energy infrastructure has to be addressed, not only by the government and energy companies, but also by the creators of the software, which appears to have many holes that need to be fixed. The attack shut down the country's largest pipeline which moves oil, gasoline, and diesel from Texas to the Gulf Coast and could leave a glut of supply in the Gulf Coast and shortages on the East Coast. Though most expect that the pipeline will be online soon, the company is not saying when.

The Biden administration is moving quickly to address the threat, as they’ve lifted tanker driver restrictions in an industry in which there are already driver shortages. 

Bloomberg reported that “[t]ruckers delivering fuel to 17 states and the District of Columbia impacted by the Colonial Pipeline shutdown can temporarily drive more hours than normal each day under an emergency exemption issued by the U.S. government Sunday.”

The Biden administration has also created a task force to try to address the growing threat to U.S. national security.

Colonial Pipeline released a statement that stated the following:

On May 7, the Colonial Pipeline Company learned it was the victim of a cybersecurity attack. We have since determined that this incident involves ransomware. In response, we proactively took certain systems offline to contain the threat, which has temporarily halted all pipeline operations and affected some of our IT systems. Upon learning of the issue, a leading, third-party cybersecurity firm was hired.

The third-party cybersecurity experts were immediately engaged after discovering the issue and launched an investigation into the nature and scope of this incident. We have remained in contact with law enforcement and other federal agencies, including the Department of Energy who is leading the Federal Government response. 

Maintaining the operational security of our pipeline, in addition to safely bringing our systems back online, remain our highest priority. Over the past 48 hours, Colonial Pipeline personnel has taken additional precautionary measures to help further monitor and protect the safety and security of its pipeline.

The Colonial Pipeline operations team is developing a system restart plan. While our mainlines (Lines 1, 2, 3, and 4) remain offline, some smaller lateral lines between terminals and delivery points are now operational. We are in the process of restoring service to other laterals and will 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.

At this time, our primary focus continues to be the safe and efficient restoration of service to our pipeline system, while minimizing disruption to our customers and all those who rely on Colonial Pipeline. We appreciate the patience and outpouring of support we have received from others throughout the industry according to Colonial.

Gasoline futures popped and dropped on the news, but are still solidly higher. Supplies of gasoline and diesel on the East Coast are adequate and, unless the pipeline is down for weeks, should only have a short-term impact. The fundamentals for gasoline and oil transcend this issue and are bullish anyway, so this situation should create volatility that can give a good opportunity to put on some hedges.

Tensions in the Gaza Strip should be watched. This past weekend, clashes over Israel trying to evict Palestinians from their home has created tension and fighting. Overnight, 3 rockets were sent toward southern Israel in the early hours of Monday morning, triggering sirens in the town of Sderot and surrounding communities, the Israel Defense Forces said. According to local government officials, at least 1 of the incoming projectiles was intercepted by the Iron Dome missile defense system.

Don’t miss out on my wildly popular trade levels on all major markets, as well as special subscriber-only updates. Call me at 888-264-5665 or email me at

President Biden did not lift the Jones Act in response to the Colonial Pipeline cyberattack. An earlier version of the post reported this information incorrectly.

About the Author

Phil Flynn is a senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. Phil is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.