Colonial Pipeline Shutdown Could See Gas Prices Rise by Up to 7 Cents This Week

Following the shutdown of a major U.S. fuel pipeline in the wake of a cyber attack, gas prices in parts of the country could see a rise of up to seven cents as early as this week, according to the AAA.

The AAA's latest projection comes in a week where the national gas price average rose by six cents to $2.96. In a statement Monday, the AAA said: "If the trend continues, an increase of three more cents would make the national average the most expensive since November 2014–the last time we saw average prices at $2.99 and higher."

Colonial Pipeline, which runs from Texas to New York Harbor and delivers around 45 percent of the fuel consumed in the east coast, paused operations last week after its networks were compromised by a ransomware attack.

In the Monday statement, a spokesperson for the AAA, Jeanette McGee, said: "This shutdown will have implications on both gasoline supply and prices, but the impact will vary regionally.

"Areas including Mississippi, Tennessee and the east coast from Georgia into Delaware are most likely to experience limited fuel availability and price increases, as early as this week.

"These states may see prices increase three to seven cents this week," McGee said.

Speaking to Newsweek, Robin Rorick, vice president of midstream and industry operations at the American Petroleum Institute, said: "Operators throughout the supply chain are coordinating with federal and state governments to mitigate supply disruptions and ensure Americans continue to have access to the fuels they need."

"These efforts include the mobilization of alternative transportation to minimize disruptions to product supply lines as well as utilization of existing inventories," he added.

In a statement Tuesday, the U.S. Energy Information Administration (EIA) said: "Until Colonial Pipeline resumes operation, petroleum distribution terminals in the Southeast will rely on inventories and on supplies obtained from alternative sources, such as the smaller 720,000 b/d Plantation Pipeline that also carries petroleum products from the U.S. Gulf Coast to as far as Washington, DC.

"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 EIA warned.

Markets along the Atlantic coast that have access to "deepwater ports," such as Savannah in Georgia, Charleston in South Carolina, Wilmington in North Carolina and Norfolk in Virginia, can receive "limited imports from the global market." They can also receive imports from "marine shipments via coastwise compliant shipping originating from the U.S. Gulf Coast," the statement said.

Markets in the Central Atlantic and Northeast regions can import petroleum from Europe and Canada, as well as "obtain supplies from in-region refineries," the EIA explained.

In a statement on May 9, GasBuddy, which tracks over 150,000 gas stations in North America, said that if the shutdown is in place through roughly Tuesday, some stations may run low on gasoline supply.

The statement said: "It's very difficult to pin the exact amount prices may rise, but for now, it appears to be a few cents per gallon, possibly growing more significant if the pipeline remains shut down for more than 2-3 more days.

"Panic buying or hoarding of gasoline will prolong outages and price spikes, making them much worse.

"These challenges may start to manifest in Southeastern states, especially Georgia, Tennessee, South Carolina, North Carolina, Virginia, Mississippi and Alabama, and to a lesser extent, Northern Florida," the statement said.

GasBuddy also noted it will take days for operations to resume normally even after the pipeline is back online.

How long the shutdown of services lasts "is critical," Tom Kloza, global head of energy analysis for the Oil Price Information Service, which tracks gas prices at 140,000 U.S. gas stations, told CNN Business.

"The greatest concern is in coastal states from Georgia north to the Delmarva Peninsula," according to Kloza, with Delmarva Peninsula referring to an area including parts of Delaware, Maryland, and Virginia.

Kloza said foreign imports could supplement fuel supply to the northeast but noted other states don't have that option. "Tennessee is also a primary supply concern, as it often runs out of gasoline during normal circumstances," he added.

Andy Lipow, a Houston-based oil consultant and the president of Lipow Oil Associates in Texas, also highlighted the duration of the shutdown will be pivotal. "Two days can be made up in orderly fashion," while a five-day shutdown could have a much more significant impact on the logistics around fuel supply.

Last Friday Colonial Pipeline shut down operations on its 5,500-mile pipeline network, which delivers gasoline, diesel and jet fuel, in a bid to protect its systems following the cyber attack.

In a statement Sunday, the company said: "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.

On Monday, the company began manually running its 700,000-barrel-per-day multi-product fuel line between Greensboro in North Carolina and Maryland for a limited period while it had existing inventories.

However, its main lines remained closed and an alternative, smaller line operated by Kinder Morgan serving the same area was reported to have reached capacity.

Newsweek has contacted Colonial Pipeline and the Independent Petroleum Association of America for comment.

This article has been updated with comment from the American Petroleum Institute and the U.S. Energy Information Administration.