Biden turns to emergency powers to counter Colonial Pipeline disruption

  • The U.S. government has declared a state of emergency to keep fuel supply lines open following the shutdown of Colonial Pipeline on Friday. The 5,500-mile conduit, whose owners include Shell Midstream Partners (NYSE:SHLX) and others, carries 2.5M barrels a day to the East Coast, or 45% of its supply of diesel, gasoline and jet fuel. While Colonial is working toward a restart of operations along the key artery, some smaller lateral lines between terminals and delivery points are now operational. In the meantime, the Biden administration is allowing drivers that transport fuel to work extra hours, while oil products could be permitted to be shipped in tankers up to New York.
  • Recap: Hackers stole almost 100 gigabytes of data from Colonial Pipeline's networks, before locking its computers with ransomware and demanding payment. Multiple sources have confirmed that a cybercriminal gang called DarkSide was behind the attack, and some evidence has emerged linking the group to Russia or elsewhere in Eastern Europe. The White House also formed a task force to probe the pipeline breach, and the Department of Homeland Security's Cybersecurity and Infrastructure Security Agency is coordinating with Colonial Pipeline.
  • Fear of shortages: U.S. gasoline futures (XB1:COM) jumped more than 3% to $2.217 a gallon as trading reopened for the week, while WTI crude futures (CL1:COM) rose 1.3% to as high as $65.76/bbl. Besides connecting refineries to more than 50M people, the pipeline network serves major U.S. airports, including Atlanta's Hartsfield-Jackson. While the U.S. Department of Energy could tap its reserve of 1M barrels of diesel fuel in the Northeast, it's "little more than a Band-Aid," ClearView Energy Partners said in a research note.
  • Outlook: The attacks are "here to stay and we have to work in partnership with businesses to secure networks, to defend ourselves against these attacks," Commerce Secretary Gina Raimondo told CBS's Face the Nation. The hack could also give renewed impetus for Biden's $2.3T infrastructure plan. In fact, the president this week is hosting top Democratic lawmakers at the White House, as well as a group of Republican senators who have proposed a separate $568B infrastructure plan, though Energy Secretary Jennifer Granholm has previously said Biden is willing to push through the "American Jobs Plan" without bipartisan support.

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