Colonial Pipeline restarted its key East Coast pipeline Wednesday, after reportedly paying hackers a ransom in cryptocurrency.
XSources told Bloomberg that the company paid $5 million in difficult-to-trace cryptocurrency hours after a ransomware attack on Friday. That's despite statements that Colonial had no intention of paying the hackers.
After getting the payment, the hackers provided Colonial with a decrypting tool to restore its computer network, Bloomberg reported. Although the payment came soon after the attack, the decrypting tool was slow, forcing Colonial to continue using its backup systems.
The largest gasoline pipeline in America, which carries 2.5 million barrels up the East Coast daily, shut down Friday following the ransomware attack. The FBI said that the Russian hacking group DarkSide was behind it.
On Wednesday, the company said it "initiated the restart" of operations at about 5 p.m. ET. "Following this restart, it will take several days for the product delivery supply chain to return to normal." On Thursday, it said it planned to restore service to all markets by mid-day.
That came after gas prices topped $3 per gallon while gas stations in the Southeast ran out of fuel
Pipeline shipments move at approximately five miles per hour, so some markets may need to rely on inventories for several days after Colonial Pipeline service is restored, the Energy Information Administration said Tuesday.
Exxon Mobil (XOM), which pumps oil and sells gasoline, fell 1.2% on the stock market today. Among other integrated oil majors, Chevron (CVX) dipped 0.7%, Royal Dutch Shell (RDSA) lost 0.4% and BP (BP) eased 1.15%.
U.S. Gasoline Stockpiles Rise
Earlier Wednesday, the Energy Information Administration reported a 400,000-barrel drop in crude oil stockpiles for the week ended May 7. Gasoline stockpiles rose by 400,000 barrels. Analysts polled by S&P Global Platts expected a 4.1 million-barrel drop in crude supplies and a 700,000-barrel increase in gasoline supplies.
However, these figures do not include the impact of the Colonial Pipeline outage. The outage will show up in data from the May 19 report.
Gasoline inventories are 1% lower than seasonal averages, but if the pipeline remains down inventories will reach five-year lows by May 14, according to S&P Global Platts Analytics.
Oil prices dropped Thursday. Brent, which helps set gas prices, slid 3.5%, to $66.89 per barrel. U.S. crude fell 3.4% to settle at $63.82/bbl.
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Gas Prices Jump
The cyberattack sparked fears of a fuel shortage, and gas stations across the Southeast ran out of gasoline.
Over 70% of gas stations in Raleigh and Charlotte were out of gasoline, 73% of Pensacola, Fla. stations and 8% of Washington stations, according to GasBuddy data.
The pipeline outage also sent gasoline prices higher. U.S. national average retail gas prices rose to $3.02 a gallon, according to AAA data released Thursday. On the futures market, gas prices sank 3.2% to $2.09 a gallon.
Experts warn drivers not to fill up their gas tanks unnecessarily.
If "consumers collectively decide to fill up their gas tanks due to fear of a shortage, it could cause a shortage," according to Platts Analytics. "For example, if 30 million cars went from 50% full to 90% full, that could be 4 million barrels drawn from service station tanks who would then try to refill from their suppliers. Such panic buying was a factor in the consumer gasoline shortages with the 1973 and 1979 oil crises."
Follow Gillian Rich on Twitter for energy news and more.
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